DBS Bank raises Taiwan's GDP growth forecast for 2021 to 5%

Taipei, April 10 (CNA) Singapore-based DBS Bank has raised its forecast for Taiwan's gross domestic product growth for 2021 to 5 percent, citing the country's competitive edge in the global semiconductor market.

The bank also pointed to Taiwan's success in containing COVID-19, which it said provided a foundation for the growing momentum of its economic fundamentals.

DBS Bank has raised its forecast for Taiwan's 2021 GDP growth from a previous estimate of a 4.2 percent increase made in January, the second time the banking group has revised its projection upwards.

DBS Bank senior economist Ma Tieying (馬鐵英) said the improved forecast was also influenced by the boost to Taiwan's exports provided by the global economic recovery.

Taiwan has especially benefited from its strength in the pure wafer foundry business at a time of a supply shortage in the global semiconductor market, Ma said.

Because of those factors, Taiwan's GDP growth will likely reach 6 percent in the first quarter and 7 percent in the second quarter, before moderating to about 3 percent in the second half of the year, according to the economist.

DBS Bank appeared more upbeat than Taiwan's government. In February, the Directorate General of Budget, Accounting and Statistics (DGBAS) raised its forecast for Taiwan's 2021 GDP growth to 4.64 percent, from an earlier estimate of 3.83 percent.

As for inflation, Ma said raw material prices in the global market have been on the rise recently, which has triggered concerns about inflation, but she said inflationary pressures in Taiwan remained acceptable.

DBS Bank said Taiwan's consumer price index (CPI) is expected to rise 1.5 percent in 2021, compared with the previously estimated 1 percent. The DGBAS expects the CPI to grow 1.33 percent this year.

Should Taiwan's central bank need to fine tune its monetary policy to keep inflation pressures in check, it could use measures such as select credit controls or open market operations instead of raising interest rates, Ma suggested.

At a quarterly policymaking meeting held in mid-March, the central bank decided to leave its key interest rates unchanged for the fourth consecutive quarter, with the discount rate staying at 1.125 percent, the lowest in the country's history.