Taiwan's economy up 9.80 percent in third quarter

TAIPEI, (AFP) - Taiwan said its economy grew by a higher-than-expected 9.80 percent in the third quarter of 2010 from a year earlier, lifted by private-sector investment.

The figure compares with a revised 12.86 percent increase in the second quarter, according to data from the Directorate General of Budget, Accounting and Statistics.

When the agency last published economic growth figures in August, it predicted the economy would expand by 6.90 percent in the third quarter.

“Private investment had the most impact on the economy, while growing public consumption amid improving conditions also contributed to growth,” said Yeh Maan-tzwu, a spokeswoman for the directorate general.

The agency raised its forecast for full year growth in 2010 to 9.98 percent -- a near 21-year high -- up from the 8.24 percent it outlined in August.

Fixed-asset investment, which includes private investment, is forecast to rise by 23.12 percent for the whole year, the directorate general said, a marked increase from 17.10 percent forecast in August.

“Especially the semiconductor sector has seen a rise in investment,” said Allen Lin, a Taipei-based economist with Concord Securities.

“Another reason for growing private investment is that some Taiwanese businesses with investment in China have come back home because wages in the mainland have become too high and their costs have risen.”The directorate general said that it expected private investment this year to exceed two trillion Taiwan dollars (66 billion US dollars), close to 2007’s record of 2.2 trillion Taiwan dollars.

The possibility that Taiwan’s private investment was being boosted by a withdrawal of some local enterprises from China is somewhat paradoxical.

Negotiators from Taiwan and China signed a sweeping economic and trade agreement in June, in the boldest step yet towards reconciliation between the former rivals, who split after the end of a civil war in 1949.

Signing the pact has been a major priority for President Ma Ying-jeou’s Beijing-friendly Kuomintang party, which swept to power in 2008 on a promise to improve the island’s economy through better ties with China.

Consumer spending appears to have been modest in Taiwan so far in 2010, judging from inflation expectations made public by the directorate general Thursday.

Consumer prices are expected to rise by 0.98 percent in 2010, it said, down from a forecast of 1.23 percent made in August.