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Taiwan 2014 GDP to grow 3 percent: officials

TAIPEI, Taiwan -- Principal government officials on Wednesday expressed their confidence that Taiwan's 2014 gross domestic product (GDP) will grow 3 percent in 2014, given that the global economy started to bottom out in late 2013.

The Legislative Yuan's Finance Committee reviewed amendments to the Law of Business Tax on Banks and Financial Institutions yesterday, while Financial Supervisory Commission (FSC) Chairman Tseng Ming-chung (曾銘宗) and Minister of Finance Chang Sheng-ford (張盛和) responded to questions at the Legislative Yuan.

Tseng said that the 2014 economy indicates moderate recovery, which bodes well for Taiwan's share market performance. Tseng's prediction of 3 percent GDP growth in 2014 nears median-value level when compared with the range of 2.09-3.8 percent projected by foreign institutions.

Tseng added that on the back of the positive economic outlooks for major world economies including the U.S., EU, China and Japan, he doesn't think the economic recovery will lose momentum later this year, which happened last year.

When asked by legislators about his view on Taiwan's share market, Chang Sheng-ford said he shared Tseng's upbeat outlook since all the uncertainties were dispelled after the euro debt crisis showed obvious signs of mitigation and the U.S. successfully pulled itself back from the “fiscal cliff.”

Tseng and Chang collectively voiced their opposition to legislators' attempt to raise the business tax on banks and financial institutions to 4-5 percent from the current 2 percent, suggesting a suspension of the imposition of the taxation.

Day Has Not Yet Come for Business Tax on Banks

Tseng and Chang said the eventual levy of a business tax on banks and financial institutions should be complementary to the ongoing annuity and fiscal reformation, adding that the time is not ripe for taxation.

Concurrently, Bank of America Merrill Lynch recently forecast that Taiwan's GDP will grow 2.9 percent in 2014, indicating a recovery that will likely remain moderate and below trend.

This forecast is higher than the bank's estimate of 2 percent growth for Taiwan in 2013 but lower than the country's long-term economic growth forecast of about 4 percent, said Marcella Chow, a Hong Kong-based economist at Merrill Lynch.

“Taiwan's strong current account surplus was mainly driven by the large goods trade surplus, as exports were improving faster than imports,” she told a media briefing in Taipei.

The strong current account surplus should continue to support Taiwan's foreign reserve accumulation, according to Chow.

Among other similar economies in Asia, Taiwan's projected 2.9 percent growth in 2014 should be slightly higher than in Hong Kong (2.8 percent) but lower than in Singapore (3.2 percent) or South Korea (3.8 percent), Chow said.

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