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Taiwanese economy likely to expand strongly in 2017 and 2018, central bank to stand pat - ANZ

In the third quarter, the Taiwanese economic growth surprised to the upside. The GDP expanded 3.11 percent year-on-year and 0.47 percent sequentially. External demand grew for the sixth straight quarter, with solid growth seen in electronics. Global rebound augurs well for the Taiwanese economy. Momentum of the Taiwanese economic growth is expected to continue. According to an ANZ research report, Taiwan’s GDP is expected to grow 2.9 percent year-on-year for the whole of 2017 and 3 percent year-on-year in 2018. This is 0.7 percentage point higher than the initial forecasts for both the years.

Meanwhile, the nation’s headline consumer price inflation is likely to come in at 0.7 percent year-on-year in 2017 and 1.2 percent year-on-year in 2018, stated ANZ. Prices of fuel and electricity are expected to see slight upward pressure in the near term amidst higher global crude prices. But solid performance of corporates in Taiwan is likely to draw capital inflows that are positive for the Taiwanese dollar. This will in turn aid in suppressing import inflation.

On the monetary policy front, the Taiwanese central bank is expected to stand pat over the next 12 months. Instead of an interest rate hike, the strength of the TWD gives an alternative tool to curb import inflation. Low inflation will continue to permit the central bank to stand pat, added ANZ.

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