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Banks cut Taiwan growth forecasts as spending lags

HSBC Holdings Plc cut its Taiwan growth forecast for 2002, joining at least three other brokerages that have trimmed their estimates in the past month, as domestic spending stalls.

HSBC cut its projection to 3.4 percent from 5 percent. J.P. Morgan Chase & Co, Barits Investment Services Corp (倍利投顧) and President Securities Corp (統一證券) have also lowered their estimates, bringing them closer to the government's 3.1 percent forecast.

``The rebound in consumption has been decidedly mild,'' said Mike Newton, an HSBC economist, in a report. ``We do not think the situation is going to get much better.''

While rising exports of computer chips and other goods helped Taiwan's economy grow 4 percent in the second quarter after the worst recession on record last year, domestic demand isn't keeping pace in an economy where consumer spending and business investment make up about 70 percent of gross domestic product.

The government expects private investment to rise 0.7 percent this year and forecasts a 2.2 percent increase in consumer spending, less than half the pace of exports.

Slowing job growth as Taiwan-based companies move production lines to China to cut costs is damping consumer spending, which makes up about three-fifths of the economy. Taiwan's jobless rate stood at 5 percent in July, up from 2.9 percent two years ago.

HSBC trimmed its 2003 growth forecast for Taiwan to 1.8 percent from 4.1 percent, about half the government's 3.5 percent estimate. It cited slowing growth in the US, Taiwan's second-largest export market.

Taiwan's exports grew 15.5 percent in August from a year earlier, a report showed Monday, lagging the median 19.5 percent forecast of seven economists surveyed by Bloomberg News.
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