Taiwan set for 2.6% GDP growth in 2020, says Natixis

TAIPEI - With improved global sentiment, global financial group Natixis says it expects Taiwan's GDP to grow at 2.6% in 2020, maintaining the pace set in 2019. Export diversification, relatively good corporate financial health versus other Asian peers, and government policies directed at supporting investment from overseas should all support growth further in 2020, Natixis says.

Taiwan led the four Asian Tigers in economic growth in 2019, and Natixis says more export diversification from its very high dependence on mainland China, supportive Government policies and a cyclical turn in the tech cycle are the drivers that will navigate Taiwan through global uncertainties.

"Looking into 2020, diversification will continue to support trade and tourism," the Natixis report says. "Exports to the US have grown 18%, while the share of visitors from ASEAN, Japan and Korea has surged from 36% in 2014 to 49% in 2019.

"The other spotlight is investment driven by Government reshoring policies. Taiwan's FDI-to-GDP ratio has surged from 1.3% in 2017 to 2.2% in 2019, the second consecutive year of growth.

"Local firms have also sped up bringing their overseas operations home, with an approved amount reaching NTD 712 billion (3.9% of GDP or USD 24 billion).

"Finally, Taiwan is well positioned to capture the tech and green cycle."

Natixis says that while corporate health has deteriorated in line with world trends, still relatively strong micro-fundamentals, especially the high return on capital, have supported growth and put Taiwan forward as the only market with faster capex expansion in developed Asia.

"On forex and rates, we expect the policy rate to remain unchanged in 2020, as was the case in 2019 (the one and only central bank in Asia ex Japan without a rate cut)."

Natixis says Taiwan's residential property market should experience stable growth in 2020, with higher building transactions and mortgage growth.

The vacancy ratio of commercial properties in Taipei has fallen from 9.3% at end-2015 to 3.2% in September 2019, reflecting stronger demand in office space. "Cities focussing on manufacturing have also already seen a surge in industrial land prices, showing the return of investment."

www.natixis.com (ATI).