Taiwan raised its economic growth forecast for 2013 on Thursday, after the fourth quarter expanded faster than expected and posted its best growth in five quarters on improved demand for the island's electronics exports and stronger consumption.
The government raised its growth forecast for the full year to 3.53 percent from a previous 3.15 percent, but it warned that global economic growth momentum remained weak.
"All economic indicators point to a strong recovery (for Taiwan)," the agency said, adding that global economic growth momentum remains weak.
The trade-reliant island's growth has been steadily picking up and largely propelled by improving demand for technology goods globally and exports to China, its largest trading partner.
The economy grew a preliminary 3.42 percent in the fourth quarter of 2012 year on year, the statistics agency said, above the median forecast in a Reuters poll for 3.10 percent growth, and rose a seasonally adjusted 1.47 percent from the previous quarter.
The last time the island's economy expanded at a faster pace was in the third quarter of 2011, when GDP growth was 3.53 percent, according to previously announced data.
The statistics office raised its inflation forecast for 2013 to 1.31 percent, from a previously forecast 1.27 percent. But analysts said inflation was mild and unlikely to prompt a change in interest rates.
"We don't expect the central bank to put forward any monetary policy changes until Q4 at the earliest; the economy is not good enough to raise rates yet," said Scott Chen, an economist with Sinopac Commercial Bank in Taipei.
"There will be more uncertainties in H2 though, if China pushes out reforms to regulate the over-heating property market."
(Read More: Taiwan on 'Road to Recovery,' Trade Ties Key)
The central bank left its benchmark discount rate unchanged at 1.875 percent at its last meeting in December, saying economic growth was expected to be mild in 2013 and inflationary pressures were easing.
Taiwanese firms are the main suppliers to most of the world's top tech brands, including Apple, Dell and Nokia. The heavy reliance on electronics exports makes the island's economy especially vulnerable to swings in external demand.