Global banking group Citibank has cut its GDP growth forecast for Taiwan this year to 3.3 percent, from the 3.7 percent it forecast last month, saying that aggravating external environmental factors will dent exports, while heightening inflation pressures are curtailing consumer spending.
The US financial services giant now expects exports to grow only 2.8 percent this year — down from the 4 percent in its last forecast — amid ongoing European debt problems and China’s worsening slowdown, Citibank economist Cheng Cheng-mount (鄭貞茂) said.
The EU and China account for more than 50 percent of Taiwanese exports, principally notebook computers, handsets and other electronic devices.
“The leadership reshuffles in Europe fall in line with our expectations, but their impact is harmful,” Cheng said on the sidelines of a real-estate seminar.
China, the main growth driver for the global economy this year, has not emerged from an economic slowdown yet, he added.
Citibank trimmed its projection for China’s GDP growth from 8.4 percent to 8.1 percent this year and its second-quarter forecast from 7.9 percent to 7.5 percent.
On the domestic front, price increases in oil products and electricity are feeding inflation concerns, with some retailers already passing on higher costs to customers, Cheng said.
That is weakening -consumer confidence and makes Taiwan a global exception, with most central banks seeking to introduce easy monetary measures to stimulate economic growth, he said.
With economic downside risks mounting, the country’s central bank will probably keep interest rates unchanged in the foreseeable future, the economist said.
“The chance for rate cuts is slim as the monetary policymaker has reiterated concerns over real-estate prices,” Cheng said.
The consumer price index is forecast to rise 1.9 percent this year, approaching the central bank’s 2 percent alarm level, he said.