Private think tank Polaris Research Institute (寶華綜合經濟研究院) yesterday slashed its forecast for Taiwan’s GDP growth for next year to 3.93 percent, from the 4.51 percent rate of growth estimated in September, citing weaker export growth momentum amid continuing global economic uncertainties.
As a result, the Taipei-based institute expected the central bank to lower its key interest rates at the quarterly board meeting next Thursday to fuel the nation’s economic growth. The institute’s forecast for next year was the lowest among its local peers in the latest slew of outlook cuts.
The Taiwan Institute of Economic Research (台灣經濟研究院) forecast Taiwan’s GDP would grow 4.22 percent next year and the Chung-Hua Institution for Economic Research (中華經濟研究院) expected Taiwan’s GDP to grow 4.07 percent. Taiwan Research Institute (台灣綜合研究院) projected 4.02 percent growth.
Polaris’ latest projection was also lower than the government’s forecast of 4.19 percent growth for next year.
Polaris president Liang Kuo-yuan (梁國源) attributed the downward revisions to the eurozone’s debt crisis.
“Most of the countries in the eurozone may launch austerity measures, which may be a downside risk for their economic growth, further dragging down export-oriented economies like Taiwan,” Liang told a press conference.
However, Liang said Taiwan’s economy would hit bottom in the first quarter next year and would rebound in the following quarters, in line with the trend of global economy.
The institute forecast 2.13 percent economic growth for the first quarter next year, increasing gradually to peak in the fourth quarter at a rate of 5.58 percent.
This year, Polaris estimated Taiwan’s economy to expand 4.33 percent, with growth in the fourth quarter of 3.03 percent.
Separately, Standard Chartered Bank yesterday also cut its forecast for Taiwan’s economic growth to 2.7 percent for next year, from 4.4 percent for this year, also because of the potential worsening of the sovereign debt crisis in Europe and possible austerity measures there.
“This, coupled with a sluggish US recovery, may result in protracted weakness in external demand, hurting local producers’ confidence,” Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered, said in the British banking group’s latest report.
The slowing confidence may translate into reduced capital spending and hiring in the manufacturing sector for next year, while derailing the recovery in domestic demand, which has so far largely mitigated weakness in the export sector, Phoo added.
However, even with deteriorating global economic and financial market conditions, Taiwan’s policymakers are unlikely to cut rates in such an environment, Phoo said.
Instead, Phoo expected policymakers to use unconventional monetary tools, such as cuts on reserve requirement ratio and reductions in negotiable certificates of deposit issuance, to replace traditional rate-cutting.