Taiwan’s Economy Probably Expanded More Than 10% (Update1)
By Chinmei Sung and Jay Wang
Aug. 18 (Bloomberg) -- Taiwan’s economy probably expanded more than 10 percent last quarter as the island’s shipments of microchips and displays weathered global risks to Asian exports.
Gross domestic product expanded 10.15 percent in the three months through June from a year earlier, after rising 13.27 percent in the first quarter, according to the median of 14 estimates in a Bloomberg News survey. The statistics bureau releases the data at 4:30 p.m. tomorrow.
The recovery has spurred consumer and housing prices and may boost pressure for higher borrowing costs, even as slowdowns in Japan, the U.S. and China, Taiwan’s biggest trading partner, cloud the export outlook. The central bank unexpectedly lifted the benchmark rate from a record low in June amid falling unemployment and rising wages.
“The falling jobless rate and steady domestic demand will help sustain growth,” said Mole Hau, a Hong Kong-based economist at BNP Paribas who forecasts a 0.125 percentage point interest-rate increase to 1.5 percent in September. “Even if China’s economy slows to 8 percent growth, that’s still very impressive and will benefit Taiwan’s exports.”
Overseas shipments have boosted earnings at companies including Hsinchu-based Taiwan Semiconductor Manufacturing Co., the world’s largest custom manufacturer of chips, and Miaoli- based Chimei Innolux Corp., Taiwan’s largest maker of liquid- crystal displays.
Taiwan Dollar
Central bank activity in the foreign exchange market may have helped, after policy makers intervened to cap gains in the Taiwan dollar during the past four months, traders who declined to be identified said. The local dollar rose 0.1 percent to 31.93 per U.S. dollar as of 1:44 p.m. in Taipei. It has gained 0.3 percent against the U.S. dollar this year.
Exports rose for a ninth month in July, with China and Hong Kong accounting for more than 40 percent of overseas shipments, according to the Ministry of Finance. The island’s first-quarter growth was the fastest since 1978 and gross domestic product will grow 6.94 percent this year, according to a forecast by the government-backed Chung-Hua Institution for Economic Research.
The consumer price index advanced 1.31 percent in July, the seventh straight monthly gain, while the jobless rate fell to 5.2 percent in June, the lowest level in 18 months.
While economic growth will slow after “the global recovery peaked,” policy makers will increase the benchmark interest rate by 0.125 percent point next month, said Tony Phoo, a Taipei-based economist for Standard Chartered Plc.
Chinese Demand
Exports to China advanced 38.8 percent in July from a year earlier even as imports and industrial production growth eased last month in the world’s fastest-growing major economy. China’s economic expansion slowed to 10.3 percent in the second quarter from a year earlier, while growth in the Japanese and U.S. economies also cooled.
President Ma Ying-jeou’s administration signed Taiwan’s first trade accord with China in June, strengthening commercial ties with the island’s biggest investment destination.
Taiwan’s central bank raised the discount rate on 10-day loans to 1.375 percent from 1.25 percent in June, joining counterparts across Asia in seeking to damp price pressures. It also introduced mortgage restrictions, including a 70 percent cap on loans for second homes, after housing prices jumped and fueled concerns that an asset bubble may form.
Governor Perng Fai-nan wrote to the chairmen of all financial institutions on the island in July, asking them to take steps to prevent housing speculation after complaints from citizens.
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