Taiwan's economy expanded faster than expected in the second quarter, leading the government to raise its 2010 growth forecast, but it said uncertainties in the global recovery could curb growth.
The government also said it is looking to run a smaller budget deficit next year, and, given the island's low inflation rate, economists expect a small increase in interest rates in the final two quarters of this year as part of a normalization of policy following the extraordinary measures introduced during the global financial crisis.
Taiwan's gross domestic product grew 12.53% in the second quarter from a year earlier, slowing slightly from the first quarter's revised 13.71% year-on-year expansion, but sharply faster than the median 10.5% forecast in a Dow Jones Newswires poll.
The robust growth rate prompted the Directorate-General of Budget, Accounting and Statistics to raise its full-year GDP growth forecast to 8.24% for this year, from the 6.14% it was expecting in May. Taiwan's economy contracted 1.91% last year.
The cabinet-level agency also raised its 2010 growth forecasts for exports to 33.2% from a previous estimate of 24.5%, and imports to 42.5% from 31.5%.
It raised its 2010 growth forecasts for private consumption to 2.8% from 1.99% and fixed investment to just over 17% from about 13%.
However, the directorate offered a much more moderate outlook for 2011, saying the island's economy will likely grow 4.64% next year as fixed investment will be roughly the same and export growth eases to 6.9%.
Citigroup economist Cheng Cheng-mount said Taiwan's growth rate will likely slow next year from this year due to base effects and as a result of the uncertainties in the U.S. and Europe.
He said he expects Taiwan's economy to expand 4.2% next year.
Silvia Liu, an economist with UBS, said: "The second quarter is already history. We are half-way through the third quarter, with a number of high-frequency domestic and global leading indicators continuing to suggest deceleration over the next few quarters."
Ms. Liu said it is difficult to say what the future trend will be for Taiwan and whether the gains in the first half, which were mainly driven by replacement demand in investment, can be sustained.
Also Thursday, Taiwan's cabinet, the Executive Yuan, approved a budget plan under which Taiwan will run a budget deficit of NT$159 billion ($4.97 billion) in 2011, smaller than the revised NT$167 billion deficit budgeted for this year.
The plan projects central government revenue will total NT$1.631 trillion next year, up 5.3% from the revised NT$1.548 trillion in revenue lawmakers approved for 2010.
The cabinet said it also approved a 4.4% increase in central government spending to NT$1.790 trillion next year, from NT$1.715 trillion in the 2010 budget.
The 2011 budget plan is still subject to a legislative review, during which it could be adjusted before receiving final approval.
The government also said it is looking to run a smaller budget deficit next year, and, given the island's low inflation rate, economists expect a small increase in interest rates in the final two quarters of this year as part of a normalization of policy following the extraordinary measures introduced during the global financial crisis.
Taiwan's gross domestic product grew 12.53% in the second quarter from a year earlier, slowing slightly from the first quarter's revised 13.71% year-on-year expansion, but sharply faster than the median 10.5% forecast in a Dow Jones Newswires poll.
The robust growth rate prompted the Directorate-General of Budget, Accounting and Statistics to raise its full-year GDP growth forecast to 8.24% for this year, from the 6.14% it was expecting in May. Taiwan's economy contracted 1.91% last year.
The cabinet-level agency also raised its 2010 growth forecasts for exports to 33.2% from a previous estimate of 24.5%, and imports to 42.5% from 31.5%.
It raised its 2010 growth forecasts for private consumption to 2.8% from 1.99% and fixed investment to just over 17% from about 13%.
However, the directorate offered a much more moderate outlook for 2011, saying the island's economy will likely grow 4.64% next year as fixed investment will be roughly the same and export growth eases to 6.9%.
Citigroup economist Cheng Cheng-mount said Taiwan's growth rate will likely slow next year from this year due to base effects and as a result of the uncertainties in the U.S. and Europe.
He said he expects Taiwan's economy to expand 4.2% next year.
Silvia Liu, an economist with UBS, said: "The second quarter is already history. We are half-way through the third quarter, with a number of high-frequency domestic and global leading indicators continuing to suggest deceleration over the next few quarters."
Ms. Liu said it is difficult to say what the future trend will be for Taiwan and whether the gains in the first half, which were mainly driven by replacement demand in investment, can be sustained.
Also Thursday, Taiwan's cabinet, the Executive Yuan, approved a budget plan under which Taiwan will run a budget deficit of NT$159 billion ($4.97 billion) in 2011, smaller than the revised NT$167 billion deficit budgeted for this year.
The plan projects central government revenue will total NT$1.631 trillion next year, up 5.3% from the revised NT$1.548 trillion in revenue lawmakers approved for 2010.
The cabinet said it also approved a 4.4% increase in central government spending to NT$1.790 trillion next year, from NT$1.715 trillion in the 2010 budget.
The 2011 budget plan is still subject to a legislative review, during which it could be adjusted before receiving final approval.
