Australia and New Zealand Banking Group Ltd (ANZ) on Friday cut its forecast of Taiwan’s economic growth for this year to take into account lingering concerns over the debt crisis in the eurozone, which has had an impact on the world’s economic fundamentals.
The bank said that slowing economic activity in China, the largest buyer of Taiwan-made goods, is also expected to have an impact on the nation’s exports.
ANZ has lowered its forecast of GDP growth for this year to 3.1 percent from an earlier estimate of 3.97 percent.
The bank said that Taiwan was expected to remain mired in a slowdown in the second quarter of this year after the economy grew only an anemic 0.39 percent in the first quarter.
The estimate given by ANZ is higher than the government’s forecast of 3.03 percent made late last month after a downgrade from its earlier prediction of 3.38 percent due to pessimism about exports.
In April, export orders fell 3.52 percent from the same month of last year and were also down 5.95 percent from March to US$36.09 billion, which was lower than the market had expected.
Meanwhile, ANZ cut its forecast of the growth of the consumer price index to 1.65 percent from 1.95 percent.
The bank said the loosened inflationary pressure reflected steep drops in international crude oil prices, a slump in the local bourse and lackluster retail sales data.
It added that in such an unfavorable economic climate, Taiwan would be able to keep consumer price growth under 2 percent, a goal that the government has vowed to achieve.
Due to the economic slowdown, ANZ said the central bank is expected to leave its key interest rates unchanged in its policymaking meeting scheduled for later this month, a move to keep liquidity ample to help offset the impact of the negative leads from abroad.
Since the end of June last year, the central bank has kept its interest rates unchanged, with the discount rate at 1.875 percent, the rate of accommodations with collateral at 2.25 percent and the rate of accommodations without collateral at 4.125 percent.