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Slower exports to hit GDP

Taiwan's economic outlook is likely to be lackluster, according to predictions from economists at Fubon Financial Holding Co (富邦金控), the nation's fourth financial holding firm by assets, who expect slower domestic demand and shrinking exports to dent economic growth next year.

Fubon Financial forecast GDP growth of between 2.5 percent and 3 percent next year, with exports expanding by an estimated 3.4 percent.

"We expect to see weak domestic demand, caused by slow consumption and investment next year," Daniel Chen (陳文郎), director of Fubon Financial's general economic research division, said in a forum yesterday.

Exports are expected to slow further, as production continues to migrate out of Taiwan. These factors would combine to blunt the nation's economic growth next year, Chen said.

A record-high 41.05 percent of export orders received last month will be produced abroad, compared with an average 35 percent in the past year, the Ministry of Economic Affairs reported on Monday.

The ratio will continue to rise in the future as Taiwanese companies relocate overseas to cut costs, which will eat away at the nation's export growth momentum and in turn narrow the trade surplus, Chen said.

Fubon Financial's GDP growth forecast is one of the lowest predictions among economists and researchers.

UBS Investment Bank predicted last month a growth rate of 2.9 percent for next year, down from an estimated 3.1 percent this year, dragged down by weaker exports.

However, Taipei-based Chung-hua Institution for Economic Research (中經院) and Taiwan Institute of Economic Research (台經院) appeared more optimistic, with GDP growth forecasts for next year of 4.02 percent and 3.9 percent.

Meanwhile, inflationary pressure could last through next year, with the consumer price index expected to rise to between 2.0 percent and 2.5 percent. Therefore, the central bank may tighten its monetary policy by gradually raising interest rates, Chen said.

Fubon Financial expected the nation's currency to stay between NT$33 and NT$34.5 on average versus its US counterpart next year.

The New Taiwan dollar could strengthen to NT$32.5 against the greenback in the middle of next year, as the US dollar should start to weaken after the Federal Reserve halts interest-rate increases at the 4.25 percent to 4.5 percent level, the financial holding company's chief economist Michael Ding (丁予嘉) said.
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