Both the IMF and HSBC yesterday revised up their forecasts for Taiwan’s GDP growth this year to more than 7 percent, which the Council for Economic Planning and Development (CEPD) attributed mainly to increasing domestic investment.
The IMF forecast that Taiwan’s economy would expand 7.7 percent this year, up from its previous estimate of 6.5 percent in April, while HSBC raised its prediction to 7.3 percent from 6.4 percent. Both are higher than the government’s forecast of 6.14 percent.
“In the second half of this year, domestic investment and consumption will be the main drive for economic growth,” CEPD Minister Christina Liu (劉憶如) said, adding that the recently signed Economic Cooperation Framework Agreement (ECFA) with China would promote local service sectors and bring in more funds for domestic investment.
Liu said the IMF’s upward revision of Taiwan’s GDP growth forecast for this year was the largest among all Asian economies, indicating that the international body was optimistic about its economic development in the second half.
HSBC, meanwhile, said that with pay hikes sweeping China, Taiwan’s onshore business income tax rate cut to 17 percent from 20 percent and improving cross-strait relations that continue to boost onshore confidence, more Taiwanese businesses would likely return to the nation to invest in the second half of this year.
“Given that Taiwan’s exports to Europe account for just 10 percent, while the share of exports to Asia is more than 60 percent, the Europe-Greece debt crisis is unlikely to have a huge impact on the export outlook,” the bank said.
HSBC said that strong regional demand, particularly from China, would continue to support the nation’s exports in the coming quarters, adding that the ECFA would enhance Taiwan’s export competitiveness in the long term.
Cathay Financial Holdings Co (國泰金控) yesterday also adjusted its monthly GDP growth forecasts for Taiwan for May, last month and this month to 0.22 percent, 0.25 percent and 0.27 percent respectively.
Nevertheless, the financial company said that the pace of economic growth would gradually decelerate throughout the year, adding that there was a 50 percent chance that the economic climate would remain “cloudy” from next month to October.
Cathay Financial predicted that the economy would grow 0.18 percent next month, lower than its previous forecast of 0.19 percent, and 0.09 percent in September, compared with its estimate of 0.16 percent last month.
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