Several foreign research institutes cut their economic growth predictions for Taiwan yesterday, one day after the Directorate General of Budget, Accounting and Statistics revealed the worst figures the nation has ever faced.
UBS Investment Research’s chief economist Sean Yokota said in a report yesterday that Taiwan was likely to experience a 6.1 percent drop in GDP growth this year, compared with his previous forecast of a 1.6 percent contraction made in December.
On Wednesday, the Directorate General of Budget, Accounting and Statistics reported that the economy contracted a record 8.36 percent in the fourth quarter last year from a year earlier and predicted a contraction of 2.97 percent for this year. That compared with a growth figure of 2.12 percent that the bureau predicted in November.
“Two-and-a-half years of progress has disappeared,” Yokota wrote in the report titled Taiwan: After the Bad News, saying the fourth-quarter figure took the real GDP level back to somewhere between the second quarter and third quarter of 2006.
Yokota said the institute’s revision, however, didn’t change its view that Taiwan’s economy would bottom out in the first half of the year and begin posting positive quarterly growth in the second half.
He based his optimism on the belief that industrial production would increase in the second half of the year as local manufacturers finish emptying out their excess inventories.
An improved monetary situation would also help, Yokota said in the report, adding that more interest rate cuts or monetary-easing measures in the pipeline would help boost economic activities among households and businesses.
On Wednesday, the central bank cut its key interest rates by 0.25 percentage points, the seventh straight cut since September, to a record low of 1.25 percent.
“Over the next 6 months money supply growth will continue to provide the liquidity that stabilizes the fall in economic activity,” Yokota wrote in the report.
But HSBC economist Frederic Neumann said in his report that his research team believes a rebound won’t come until next year.
HSBC said the economy would fall 5.2 percent this year, instead of its earlier 0.7 percent estimate, before recovering to a growth figure of 2.5 percent next year.
In its report, Goldman Sachs said the economy would shrink by 6.5 percent, instead of an earlier forecast of a 3 percent drop, while Barclays Capital now expects the economy to shrink by 4 percent instead of its previous prediction of a 0.5 percent decline.
Credit Suisse’s report yesterday, however, was starkly pessimistic. It changed its forecast to a decline of 7.2 percent from a 1.1 percent contraction.
With limited effects from a weakening NT dollar and the government’s stimulus packages, Credit Suisse said the economy would post declines of 11 percent, 10 percent and 7 percent in the first three quarters and nearly no growth in the last quarter of this year.