Cathay Financial Holding Co (國泰金控) yesterday raised its GDP growth forecast for Taiwan to 10.08 percent this year, the highest in 21 years on stronger exports and private consumption.
The nation’s largest financial service provider warned, however, of possible contraction toward the year-end and into next year if the recovery in the US and Europe proves slower than expected.
“The nation’s economy is likely to expand 10.08 percent this year, rising by double digits for the first time since 1989,” Cathay Financial chief economic advisor Kuan Chung-ming (管中閔) said.
Kuan attributed the expected lustrous showing to strong external demand for Taiwan-made electronics, as well as improving consumer spending.
Cathay Financial’s forecast is the most optimistic, higher than the 8.24 percent expansion projected last month by the Directorate-General of Accounting, Budget and Statistics.
Kuan, also a research fellow at Academia Sinica and finance professor at National Taiwan University, said GDP may surge above a record NT$14 trillion (US$440 billion) this year.
“While exports will continue to be the main driver, private consumption will also improve,” Kuan told a new conference.
However, the high growth this year may pose a tough challenge for sustained expansion next year, as the economy is already showing signs of slowing down, Kuan said.
The economy is likely to contract 0.06 percent in December, from November’s expected growth of 0.03 percent, Kuan said.
“The chance of contraction is 53 percent, meaning it would be easy for the government to take steps to reverse the trend,” he said.
Export orders received by major technology firms next quarter and in the first quarter next year may shed critical light on the economic landscape next year, Kuan said.
Cathay Financial said its GDP forecast could better capture the nation’s economic development than the government’s statistics agency because it is conducted monthly and seasonally adjusted.