Cathay Financial Holding Co (國泰金控), the nation’s largest financial services provider, yesterday revised down its GDP growth forecast for this year to 2.45 percent, from the 3.73 percent it estimated in March, amid rising uncertainties about both external and internal economic momentum.
The team’s forecast was the lowest among domestic think tanks and it was lower than the 3.03 percent growth forecast by the Directorate-General of Budget, Accounting and Statistics last month.
“In our view, it is impossible that Taiwan’s economy could expand by more than 3 percent this year,” National Central University economics professor Hsu Chih-chiang (徐之強), who is also the co-leader of the research team, told a media briefing.
A tightening financial market since March, caused by uncertainty over a policy to impose a capital gains tax on securities investments and the eurozone’s continuing debt problems, was the main factor behind the pessimistic outlook.
“The financial market’s tightening may further drag down the nation’s overall economic momentum in the near future,” Hsu said.
Compared with data the team used in its previous forecast in March, current financial conditions are expected to drag down GDP expansion this year by 0.75 percentage points, Hsu added.
The other negative driver for the economy this year was worse-than-expected export figures, Hsu said.
Taiwan’s exports posted a 4.7 percent year-on-year decline in the first four months, marking the worst performance among the four Asian Tigers, according to Ministry of Finance data.
Following the deteriorating European economy, momentum in China — a major source of European imports — might also slide, further impacting Taiwan’s exports and its economy, because China is the largest export sector for the nation, Hsu said.
Despite facing continuing economic uncertainties, Cathay Securities Co (國泰綜合證券) expects the TAIEX to bottom out in the third quarter and to recover in the fourth quarter of the year.
“Although economic growth was lower than expected, momentum in the second half of the year is still expected to be stronger than the first half,” said Boryi Chien (簡伯儀), an assistant vice president in the brokerage house’s research department.
Cathay Securities expects the benchmark TAIEX to rally to 8,181 points by the end of the year, with the electronics sector leading the recovery due to momentum created by new products, Chien said.