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Citibank upbeat about local economy

Despite widespread pessimism that the global economy will be severely impacted by the Iraqi war and the outbreak of a new type of respiratory disease, Citibank NA (花旗銀行) yesterday remained optimistic about this year's economic outlook.

"The US economic recovery in the second half year is still foreseeable if the war ends in six weeks," said Cheng Cheng-mount (鄭貞茂), vice president of financial markets, adding that it's too early for market watchers to be pessimistic with the Iraq war only in its second week.

With consumption not expected to pick up anywhere soon, Cheng, in a briefing yesterday, predicted that oil prices would not stay above US$30 per barrel, US greenbacks will strengthen and private investment will begin to grow in the US once the superpower declares victory.

When the war is over, Cheng said, interest-rate cuts are expected in both the US and Taiwan, stimulating investments.

As a result, the domestic economy is expected to improve in the third quarter and peak in the fourth quarter, Cheng said. The bank retained its earlier estimates of economic growth, forecasting 3.4 percent GDP this year.

But the outbreak of severe acute respiratory syndrome may have a worse-than-expected impact on economies of infected areas, such as China, Hong Kong and Singapore, he said.
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