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Local economy poised to pick up steam in H2: Ifo

TAIPEI, Taiwan -- Taiwan's economy will gain traction over the next six months on the back of the global economic rebound, according to the latest Institute for Economic Research (Ifo) World Economic Survey released recently.

Germany-based Ifo rated Taiwan's overall economy, capital expenditure and private consumption as “satisfactory” in the third quarter, projecting that the nation's economic climate would turn positive in the following six months, the Central News Agency (CNA) reported.

The global economic performance index rose 2.7 points to 105 in the third quarter, Ifo said, adding that the world economy is expected to continue strengthening in the next six months.

Assessments of the current economic situation, as well as the economic outlook, improved somewhat compared to April, Ifo said.

On the back of the global recovery, Ifo predicts Taiwan's consumer prices, exports, interest rates and stock market to strengthen in the following six months.

Economic performance and capital expenditure are also at their highest levels since the fourth quarter of 2011, CNA cited the survey as saying.

The latest Ifo survey was based on responses by 1,146 economists from 121 countries, with the NDC acting as the coordinating body in Taiwan.

But as global economic indicators rise, driven by growth in Asia and North America, the think tank spotlighted potential risks. “Almost three quarters of experts surveyed believe rising energy prices and supply shortages may pose a threat to the world economy.”

Taiwan's economy grew at its fastest annual rate in 1 to 1.5 years in the second quarter, increasing pressure on the central bank to hike interest rates before the end of the year to curb rising inflation.

April-June gross domestic product (GDP) growth quickened to 3.84 percent on-year from 3.14 percent in the first quarter, underpinned by robust demand for Taiwan's electronic products from markets in China and the United States.

The figure handily topped the median forecast of 3.27 percent growth in a Reuters poll, and bodes well for Taiwan to achieve its 2014 target of 2.98 percent, which would be the fastest rate since 2011.

However, with inflation accelerating in the last few months, the growth spurt could put pressure on the central bank to raise interest rates for the first time in three years, some analysts said. A few are penciling in a 0.125-percent hike before the end of the year.

Rate Hike Pressure Looms

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