The production value of Taiwan's machine tool industry is expected to increase this year by about an annual 4.5 percent on the back of a global economic recovery, according to a research report Wednesday.

In the report, the Industrial Economics and Knowledge Center under the government sponsored Industrial Technology Research Institute forecast that the output of Taiwan's machine tool business will total NT$143.95 billion (US$4.8 billion) in 2014, up from NT$137.75 billion last year.

Riding the wave of a global economic recovery, the aviation and auto businesses worldwide will drive the growth of the machine tool industry, according to the IEK.

It said however that Taiwan has to be aware of escalating competition from machine tool manufacturers in China and South Korea, which have been intensifying their efforts to increase their share of the global market.