Standard and Poor’s Rating Services (S&P) yesterday said that in its best scenario, the Taiwanese economy could shrink 4 percent annually this year on better-than-expected improvement in the global economy. The rating agency two months ago forecast a 4.3 percent contraction for Taiwan this year.
Yesterday’s forecast, however, did not factor in the potential impact of Typhoon Morakot, which had a severe impact on the nation’s agriculture and tourism sectors as torrential rains triggered large-scale mudslides and flooding.
“We may revise [our forecast] after industrial and export data for August are released,” S&P global chief economist Subir Gokarn said during a teleconference.
Most foreign investment banks expect that Taiwan’s GDP growth rate will decline between 3.6 percent and 7 percent year-on-year this year.
Taiwan, like other economies in the region, is benefiting “from the strength of the turnaround in China as other economies see increases in their exports to China,” Gokarn said, adding that this phenomenon was the result of recent stabilization in the global economy.
The economies in South Korea, Singapore and Hong Kong, for instance, are expected to post yearly declines of 2.3 percent, 4.3 percent and 4.5 percent this year at best, S&P said.
S&P said it was seeing positive signs of growth recently. Japan’s GDP started growing in the second quarter and, in Europe, Germany and France also saw their GDP return to positive territory last quarter, it said.
Additionally, the governments’ monetary and fiscal measures appear to have played a significant role in shoring up domestic demand amid disastrous exports, Gokarn said.
Next year, all the countries in the Asia-Pacific region are expected to return to positive territory, after hitting bottom in the first half of this year, S&P said.
It would be a while, however, before the region regains economic vigor, it said.
Taiwan’s economy could grow between 3 percent and 3.5 percent year-on-year next year, Gokarn said.
Local equities, meanwhile, are expected to see some corrections over the next months and the TAIEX could fall to about 6,500 points.
The benchmark index closed at 6,733.23 yesterday, down 0.82 percent from the previous day.
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