Taiwan leader sees steady GDP growth, eyes inflation

TAIPEI (Reuters) - Taiwan President Ma Ying-jeou said on Monday that the island needs to diversify its exports to stay competitive and forecast 4 percent economic growth next year.

Taiwan government forecasts of 3.92 percent growth next year and a 4.04 percent contraction this year as the tech-reliant economy eases out of a recession due to the worst global downturn since the Great Depression.

"Judging from the pace of the recovery and judging from the forecasts of major businesses in Taiwan, those figures are reliable," Ma told Reuters in an interview at the presidential office.

He also said more of Taiwan's exports should be heading for China as their final destination.

"We could diversify the exports market, not focusing entirely on the United States or Europe," Ma said.

"Actually the largest export destination is mainland China. We will modify that policy so that mainland China is no longer treated only as a factory, but rather as a market.

The global credit crisis caused a slump in Taiwan's exports, which are the mainstay of its $390 billion tech-reliant economy.

China, including Hong Kong, and the United States are Taiwan's top export destination, making up around 60 percent of the island's total shipments, and electronics products contribute nearly half of the island's total exports.

Taiwan investors have poured about $100 billion into fast-growing economic powerhouse China, lured there by a common language and lower labor costs, often to make goods that are later shipped to Europe and the United States.

Ma also added that Taiwan's central bank was concerned with the inflows of hot money that has pushed the Taiwan dollar to one-year highs a few weeks ago.

"We are watching (hot money) very closely so that it will not cause inflation," Ma said.

(Additional reporting by Lee Chyen Yee and Lin Miao-jung)