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Barclays sees brighter Q2 growth for Taiwan's economy

2012/05/03 18:08:10

Taipei, May 3 (CNA) Financial services provider Barclays predicted Thursday that Taiwan's economic growth will accelerate in the second quarter of 2012 due to stronger momentum in the tech sector.

The country has emerged from a technical recession in the first quarter after its gross domestic product (GDP) expanded by only 1.1 percent from the fourth quarter and by 0.36 percent from a year earlier, Barclays said in a press release.

From a sector perspective, the lower-than-expected growth was the result of a contraction in manufacturing that was caused by factors such as a one-time disruption of petrochemical production and a chronic shortage of disk drives that disrupted personal computer output.

In addition, sluggishness remained in the pillars of the services sector -- wholesale trade, construction and real estate, it added.

Despite the weak GDP growth, Barclays said that Taiwan is entering a stronger cyclical upturn and that it expects momentum in exports to accelerate in the second quarter as the cycle of the technology industry moves into higher gear.

Key drivers for the second-quarter GDP growth include an easing of the disk drive shortage and a brisk summer launch season in North Asia for a slew of consumer electronics, Barclays said.

"In Taiwan, companies are already ramping up capacity utilization, as indicated by the recent sharp drop in the number of workers on involuntary unpaid leave," the bank said.

"The outlook for investment is also looking up, with a number of semiconductor manufacturers issuing stronger guidance for capital expenditures," it added.

Barclays has forecast Taiwan's 2012 GDP growth at 3.5 percent, despite the recent increase in fuel prices and a decision by the government to implement electricity rate hikes.

In addition, the bank continues to believe that there is scope for Taiwan's central bank to hike key interest rates at least twice this year, starting in its next quarterly meeting scheduled for June.

Given the tightening labor market, several companies such as Hon Hai Precision Industry Co. and Asustek Computer Inc. are also mulling wage increases to retain workers, which could pose upside risks to inflation, Barclays said.

(By Jeffrey Wu)