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Standard Chartered sees '12 growth hitting 2%

Standard Chartered Bank PLC (SCB) economist Tony Phoo (符銘財) yesterday stated that it is still likely for economic growth in Taiwan to reach at least 2 percent in 2012, citing the expected economic recovery in the second half of this year and cross-strait ties as the main reasons.

According to Phoo, although the decline of exports in July was more severe than expected, real quarter-on-quarter GDP growth was still positive in the first and second quarters of this year.

Phoo stated that the economic structure of Taiwan changed two to three years ago, and now not only exports but also domestic demand is important to the economic growth of Taiwan.

To sustain his argument, Phoo used a chart to demonstrate that during the financial crisis both exports and domestic demand in Taiwan dropped, while in 2012 export demand dropped but domestic demand remained positive.

"Taiwan is in much better shape than 2008 and 2009," the economist said.

"The number of people employed is still rising while trade volume is decreasing, which is different from previous years," said Phoo. "This is the reason why domestic demand is still positive when exports declined in 2012."

Furthermore, according to Phoo, two cellphone manufacturers are scheduled to launch new smartphones in the near future, which is expected to boost economic growth in the second half of the year.

Cross-strait Ties

The economist said he expected that after the meeting of the 18th National Congress of the Communist Party of China, the early harvest list of the Economic Cooperation Framework Agreement will increase from approximately 800 items to 4,000 to 5,000 items, which will benefit Taiwan greatly.

Furthermore, the signing of a memorandum of understanding for investment may increase the investment from national enterprises in mainland China to Taiwan, Phoo said.

The number of tourists from mainland China also increased by 50 percent in 2012 year on year, and the number is likely to reach 2 million in 2012, he said.

Inflationary Risk Increases

Commenting on August's four-year high of 3.42 percent inflation, Phoo said that the rate this year is likely to remain high.

"Although weather conditions are likely to improve in the second half of 2012, due to the milder weather conditions of the last two years, prices of vegetables are not likely to be lower than previous years," said Phoo.

The latest adjustment to electricity rates in this coming December is also likely to push prices related to accommodation and transportation higher, he said.

As a result, Phoo said he expects the central bank will not lower the interest rate due to inflation and the risk of higher house prices.

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