Hong Kong-based brokerage CLSA has drastically lowered its forecast for Taiwan’s GDP growth to minus 11 percent this year, saying the ongoing global recession would deal a sharp blow to the nation’s export-dependent economy, making it the worst performer in all of Asia.
Yesterday’s prediction was the most pessimistic as other institutes at home and abroad put the figure at between minus 3.3 percent and positive 2.12 percent for this year.
“Investment is extremely volatile, with exports collapsing and given the weakness of domestic demand we expect more than a 20 percent fall in fixed investment this year,” the CLSA report said.
The institute projected Taiwan’s economy would shrink by 11 percent this year, the worst performer among all Asian nations, adding it was “tying with Singapore as the most vulnerable economy in the region.”
The report predicted that Singapore’s economy would contract by 10 percent this year on plunging exports, consumption and investment.
Last year, the major Asian brokerage forecast an average decline of 2.7 percent for Taiwan this year and minus 1.2 percent for next year.
CLSA forecast the nation’s exports would see a 28 percent year-on-year fall with negative volume growth in every quarter until the middle of next year, the report said.
That “means that the real net trade position is a drag on growth,” the report said, adding that export orders suggest that the first quarter bounce of this year will be more modest than elsewhere in Asia.
Heavy increases in government spending would not be enough to prevent a double digit GDP contraction for Taiwan, CLSA said.
While Taiwan has yet to disclose its GDP figure for the final quarter of last year, the brokerage forecast the country’s foreign trade would prove to be in a “collapsed” state as shown by the data of the Council for Economic Planning and Development a day earlier.
GDP growth is likely to have contracted 7 percent in the fourth quarter of last year as council indicators have been a reliable gauge, the report said.
Exports, the prime driver of Taiwan’s GDP growth, have suffered two-digit declines since last July, seriously suppressing consumer spending, the report said.
The brokerage estimated the contraction in foreign sales would persist until the third quarter of next year, with government spending as the sole positive contributor.
CLSA said exporters in Asia would be hurt more this time around than the regional financial crisis a decade ago.
“Asia, having avoided the perils of too much leverage, is finding that its growth is acutely vulnerable to the cessation of demand from the West,” the report said.
Council Vice Chairman Hu Chung-ying (胡仲英) dismissed the CLSA forecast as “exaggerated” yesterday evening, insisting the government’s stimulus program would help keep GDP growth positive.