Major foreign brokerage houses have cut their forecast for Taiwan’s economic growth next year in their latest reports in light of the increasing risks surrounding the European sovereign debt crisis and global growth more generally.
Goldman Sachs Group Inc on Thursday revised downward its forecast on Taiwan’s GDP growth for next year to 3 percent, from the 3.2 percent it predicted previously. The US brokerage house estimated growth of 4.4 percent for this year.
“The downward revision was in light of the recent revisions to our global growth forecasts, most notably in Europe,” Hong Kong-based Goldman Sachs economist Shirla Sum said in a report.
Goldman maintained a cautious stance on Taiwan’s growth outlook going into next year, saying the country was one of the most vulnerable in the region to an external slowdown.
In addition, with little room for monetary policy maneuvering and limited impact from further easing in the current downturn, Taiwan’s weakness could persist in the face of global headwinds, Sum said.
Against rising risks surrounding global growth and the European sovereign debt crisis, Goldman Sachs expected the central bank to cut rates by 25 basis points in the first half of next year and keep rates on hold for the rest of next year.
The latest reports issued by Morgan Stanley and UBS AG also indicated that Taiwan’s weakening exports could extend into next year, as external uncertainties continue to intensify.
“Taiwan’s exports are lacking strength in branding and have relatively high exposure to developed markets. The sluggish exports are causing businesses to cut back on capital expenditure already,” Morgan Stanley economist Sharon Lam (林琰) said in a report issued on Tuesday.
Morgan Stanley said a technical recession was likely in Taiwan in the second half of this year because the nation posted negative sequential growth in the third quarter and deteriorating external conditions may lead to negative growth in the fourth quarter.
Morgan Stanley revised down its forecast on Taiwan’s economic growth for next year to 3.1 percent, from the 3.6 percent previously forecast. It maintained a 4.2 percent growth forecast for this year.
On Wednesday, Swiss-based UBS AG cut its forecast on Taiwan’s GDP growth for next year to 1.5 percent, from the 2.7 percent growth estimated previously.
Council for Economic Planning and Development Vice Chairman Hu Chung-ying (胡仲英) said yesterday the country would not suffer a double-dip recession, after a UN report released on Thursday said that a double-dip recession was looming for Europe, Japan and the US.
Hu said only some European countries, such as Italy, Greece and Portugal, might face this predicament, because “they are still trapped in their plights.”
Additional reporting by CNA
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