Wed, Aug 31, 2011 - Page 12 News List

SinoPac slashes its GDP forecast

By Crystal Hsu  /  Staff Reporter

SinoPac Holdings Co (永豐金控) slashed its forecast for the nation’s GDP growth to 4.75 percent this year, from its estimate of 5.52 percent last month, prompted by growing unease about the global economy.

The company viewed the stock market rallies in the past two days as technical rebounds that might not last given the number of major technology companies that have issued conservative guidance about business prospects.

“We are not pessimistic, but feel increasingly uneasy about the economic landscape ahead,” SinoPac head economist Jack Huang (黃蔭基) told a seminar on cross-strait currency trade.

The sputtering US economy and spreading debt crisis in the eurozone would lengthen the inventory correction cycle, suppressing demand for electronics in coming months, a historically high season for the technology sector, Huang said.

Exports, which totaled US$154.1 billion for the first six months, are expected to bolster the nation’s GDP by 4.6 percentage points this year, making the nation vulnerable to external volatilities, Huang said, citing official statistics.

“The global financial crisis struck soon the last time I felt uneasy,” the economist said. “The situation will deteriorate rapidly if authorities fail to address it in quick fashion.”

Fortunately, the nation could continue to benefit from warming trade ties with China and Southeast Asia, which receive 56 percent of the nation’s outbound shipments.

SinoPac economist Chuang Re-hong (莊瑞鴻) said he has yet to spot a substantial increase in export orders as has historically been observed ahead of the Christmas and US Thanksgiving holiday sales.

The trend would not bode well for the nation’s export-oriented economy, Chuang said, adding consumers at home and abroad would cut spending amid a global equity market turmoil.

“We may trim GDP growth further if economic bellwethers sink deeper than expected,” Chuang said.

SinoPac now expects inflationary pressure to average 1.63 percent this year, after expanding a mild 1.45 percent in the first half comfortably below 2 percent.

Stable consumer prices would allow the central bank room to hike interest rates by 12.5 basis points next month and in December, but it may stay put next year as the world economic recovery grinds to a halt, Huang said.

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