By Fanny Liu
TAIPEI--Taiwan predicts steady growth next year on strong demand
in its semiconductor export markets, as falling oil prices keeps
inflation in check and is likely to defer a rise in interest
rates.
Gross domestic product is forecast to rise 3.50% next year, the
strongest rate since 2012, the Directorate General of Budget,
Accounting and Statistics said Friday. The agency expects GDP to
rise 3.43% this year, picking up from growth of 2.23% last
year.
The agency said global demand for Taiwanese-made processors will
remain strong next year as they wind up in new iPhones and other
gadgets, and given the global rollout of the fourth-generation
mobile network. The agency expects Taiwan to ship 3.56% more goods
and services abroad in 2015, up from an estimated 3.01% increase
for this year. Corporate investments will also grow at a much
faster rate of 5.59% next year, compared with an estimated 4.10%
for this year.
Orders for Taiwanese components from tech titans including Apple
Inc. (AAPL) and Microsoft Inc. (MSFT) have hit new highs for the
past two months. Taiwanese-owned factories onshore and in China are
key assemblers and suppliers of components to new iPhones, which
have seen strong demand from consumers since the device's September
launch.
Growing exports are also creating new jobs and raising wages.
Private consumption will likely grow 2.76% this year and 2.74% in
2015, the agency said.
While demand from the U.S. and China has improved, a cooling
Chinese economy remains the biggest risk to Taiwan's exports next
year, as the cross-strait trading partner is Taiwan's biggest
export market, Standard Chartered economist Tony Phoo said.
Other headwinds are also emerging for the island's export-driven
economy. The agency said falling energy prices will diminish the
value of petrochemical exports, while Taiwan's handsets and
computers will likely continue to bleed market share to competitors
from China and South Korea.
"As long as local manufacturers continue to relocate their
production facilities to China and ASEAN rather than returning to
Taiwan, the improved global demand will unlikely translate to
actual growth in [Taiwan's] headline exports and help contribute to
GDP growth," Bank of America Merrill Lynch Global Research said in
a report.
About half of Taiwan's output is produced outside of the
island.
The agency trimmed its inflation estimate to 1.18% for this year
because of lower oil prices, which continued to plummet Friday
after the Organization of Petroleum Exporting Countries left its
output target unchanged. The inflation estimate compares with its
previous forecast of 1.64%, and the central bank's tolerance of 2%.
The agency also said consumer prices will likely rise just 0.91%
next year. Analysts said modest inflationary pressure, which is
further suppressed by the decline in oil prices, continues to
provide room for the central bank to refrain from raising interest
rates.
Write to Fanny Liu at fanny.liu@wsj.com