Three foreign banks yesterday stood by their conservative outlook for Taiwan’s economy this year, with GDP growth estimates ranging from 2 percent to 2.7 percent amid weak exports, although concerns about Greece’s possible exit from the euronzone eased following Greek polls overnight.
Standard Chartered Bank kept its forecast for GDP growth unchanged at 2.7 percent, compared with three months ago, as stimulus measures by major trading partners, notably China, would mitigate pains caused by Europe’s fiscal woes, Taipei-based economist Tony Phoo (符銘財) said.
“Europe’s debt problems will continue to weigh on the global economy, although the electoral triumph of [Greek] pro-austerity camps has lifted worries over eurozone collapse,” Phoo said.
The US, struggling to cut unemployment while reining in government debts, cannot be counted on to supply the catalyst for Taiwan’s export-reliant economy, he said.
The domestic front appears more encouraging as consumer confidence remains healthy despite challenges from the hikes in energy costs and the government’s plans to tax capital gains on securities investments, Phoo said.
“Unfavorable government policies do not have evident impact on household spending thus far, although they dampen consumer confidence a bit,” he said, attributing the resilience to a stable job market and high savings rates.
Phoo said he expected the central bank to leave its discount rate intact at 1.875 percent on Thursday in a continued attempt to maintain a loose monetary environment, while seeking to check inflationary pressures.
Crude oil prices are unlikely to pull back going forward after global central banks embark on an easy monetary cycle to shore up economic growth, he said.
To that end, China, Taiwan’s biggest export market, may lower interest rates and required reserve ratios two to three extra times this year, Standard Chartered Bank said.
However, flagging external demand drove DBS Bank to cut its estimate for economic growth from the 2.9 percent in its previous forecast to 2 percent, the Singaporean lender said in a report released yesterday.
“Taiwanese exporters are under pressure from deteriorating trading conditions and competitiveness in the second half,” DBS said, predicting Europe’s economy would contract 0.6 percent this year, from a previous forecast of a decline of 0.4 percent.
The trend will inevitably slow domestic demand and the government is not helping — with its tax plans and electricity rate hikes, DBS said.
HSBC PLC shares that dim view about the economy after exports declined for the third consecutive month last month, from the same period a year ago.
The British banking group expects GDP to increase at a modest pace this year, sustained by domestic demand, but the foundation is starting to look shaky, HSBC Greater China economist Donna Kwok (郭浩庄) said in a note yesterday.
“Commercial sales may not hold up in the event of weakening employment and an escalated downturn in equity markets,” she said.
Based on HSBC's GDP growth forecast for Taiwan, the economy is estimated to grow 0.4 percent in the first quarter, 0.2 percent in the second quarter, 2.0 percent in the third quarter and 6.2 percent in the final quarter of the year.
Both DBS and HSBC expect the central bank to stand by the current interest rates — with the chance of a cut higher than an upward adjustment — because inflationary pressure remains a concern.