Robust exports fuel surge in Taiwan GDP growth
Central bank faces pressure to boost interest rates as robust demand for electronic products in quarter fuels sharpest GDP surge in 18 months
Taiwan's economy grew at its fastest annual pace in 18 months in the second quarter, increasing pressure for a rise in interest rates to curb rising inflation.
April-June growth quickened to 3.84 per cent from 3.14 per cent in the first quarter, the statistics agency said yesterday, underpinned by robust demand for electronic products from markets in mainland China and the United States.
The figure bodes well for Taiwan to achieve its target for the year of 2.98 per cent, which would be the fastest rate since 2011.
However, with inflation accelerating in the past few months, the growth spurt could put pressure on the central bank to raise interest rates for the first time in three years, analysts said. A few are pencilling in an increase of 12.5 basis points before the end of the year.
"We expect that third-quarter growth could even exceed second quarter and that full-year growth could hit 3.29 per cent," said Achilles Chen, an analyst at Cathay Financial Holdings.
"In light of this, we expect that the central bank will raise interest rates in December at the earliest."
Annual inflation at 1.64 per cent in June is still below the central bank's target of 2 per cent, but higher costs of food and fuel imports have driven prices up recently. The bank has left its key rate steady at 1.875 per cent since the third quarter of 2011.