Boston, MA -- (SBWIRE) -- 01/27/2014 -- BMI Forecasts 3.0% GDP Growth For Taiwan in 2014
Weaker for a bit, stronger for a bit, and then back to a comparatively low trend rate. That is the BMI view of Taiwan's economy in three different periods: Q313 (actual), Q413 (estimate) and then 2014 as a whole (forecast). Third quarter GDP growth, according to preliminary data released in November, was poor. GDP was up by only 0.1% quarter-on-quarter, and by 1.6% on an annual basis. This rather stagnant performance was in line with weaknesses in trade, always critical for an open and outwardly-focused economy such as Taiwan. However, we are confident there will be a pick-up in the last quarter of 2013, based on a short-term bounce in the Chinese economy and the global tech industry cycle - Taiwan depends rather heavily on exports of semi-conductors and other related IT products. Unfortunately, we do not see this end-2013 strength running through into 2014. On the contrary, we think the Chinese economy will slow again as the Beijing government seeks to tackle imbalances, and foresee that the tech cycle will turn against Taiwan, potentially with a downwards inventory adjustment in global electronics supply chains. Two further factors also cloud the outlook for 2014. One is the qualitative change in the mainland China economy, where local manufacturers are shifting their focus away from production for export markets and towards meeting the needs of an increasingly sophisticated domestic consumer sector. This means, for example, that China is producing its own flat-panel TVs and therefore importing less from Taiwan. The second relevant fact is the way the local administration of President May Ying-jeou is getting bogged down in political infighting, a process which seems to be undermining its resolve to tackle reforms of pension and energy policies. The fiscal balance is coming under pressure and businesses are becoming cautious in advance of local elections, to be followed by presidential elections in 2016. Taking into account these factors, we estimate GDP growth in 2013 will be 2.1%, rising to 3.0% in 2014, which is below the trend rate of recent years.
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The limited recovery in GDP and trade in 2014 will help to pull activity levels in the country's main ports back into positive territory. This is in contrast to 2013 when we estimate that throughput in some ports (such as Taichung and Keelung) actually contracted. Growth in 2014 will, however, remain very low in percentage terms. Broadly speaking, Kaohsiung - Taiwan's largest port - remains the most resilient, not least because it is attracting new investment. On the plus side, the policy of cross-straits integration is expected to continue as Taiwan's ports and shipping lines position themselves to work through a series of alliances and partnerships with mainland companies over the next few years.
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