Standard Chartered raises Taiwan GDP growth forecast for 2024

Taipei, July 13 (CNA) London-headquartered Standard Chartered Bank has raised its forecast for Taiwan's gross domestic product (GDP) growth in 2024 to 3.7 percent, saying its exports will benefit from the end of inventory adjustments in the global electronics industry.

Standard Chartered's estimate of 3.7 percent GDP growth was 0.6 percentage points higher than its previous projection of 3.1 percent made in February.

The forecast was slightly lower than that of the official Directorate General of Budget, Accounting and Statistics, which predicted 3.94 percent growth in 2024 in late May after an estimate of 3.43 percent growth made in February.

Standard Chartered's forecast was relatively close, however, to a projection of 3.77 percent growth by Taiwan's central bank in mid-June.

Standard Chartered senior economist Tony Phoo (符銘財) said in the statement that the global electronics industry is in a cyclical recovery, and as inventory adjustments come to an end, Taiwan's strong high-tech export sector should benefit from the rebound.

In addition, companies in Taiwan are expected to increase their capital expenditure to expand capacity to meet rising global demand, Phoo said.

The economist noted that Taiwan's economy has been following an upward trend, especially given Taiwan's economic performance in the first quarter, when GDP grew 6.51 percent, the highest quarterly growth since the 8.07 growth in the second quarter of 2021.

After seasonal adjustments, however, GDP was only up 0.27 percent in the quarter from a year earlier.

With inventories in the electronics industry returning to healthy levels, Phoo said, Taiwan's imports of semiconductor equipment rose 11.1 percent from a year earlier in May, the first increase since September 2019, which indicated rising capex in the high-tech sector.

Because the high-tech sector is the backbone of Taiwan's economy, these positive leads should pave the way for continued strong growth in the second half of the year.

At the same time, domestic consumption should benefit from a robust stock market.

On Thursday, the Taiex reached a fresh closing high of 24,390.03 before a 1.94 percent technical pullback on Friday. Before Friday, the Taiex had soared about 36 percent since the beginning of this year, led by the electronics sector.

Phoo said the local tourism industry is also expected to see an increase in inbound visitors to the government's goal of 10 million foreign arrivals in 2024, which should push up domestic spending.

In terms of inflation, Phoo said consumer price index (CPI) growth is expected to moderate in the second half of this year, although the CPI rose 2.24 percent in May, above the 2 percent alert set by the central bank.

However, core CPI, which excludes vegetables, fruit and energy, stayed below the 2 percent target for a second straight month in May, Phoo said.

The economist said that unless unexpected factors push up inflation to force the central bank to tighten its monetary policy, key interest rates are expected to remain unchanged in the second half of 2024.

At a quarterly policy-making meeting held in mid-June, the central bank left interest rates intact after a surprise hike of 12.5 basis points at the previous quarterly meeting in March.

After the June meeting, the discount rate remained at a 15-year high of 2 percent, with the rate on accommodations with collateral at 2.375 percent, and the rate on accommodations without collateral at 4.250 percent.

The central bank is predicting that Taiwan's CPI will rise 2.12 percent in 2024.