Thu, Dec 13, 2012 - Page 13 News List

Cathay sees 3.88% GDP growth next year

CLEAR ROAD AHEAD:Cathay said external demand showed signs of picking up, with China recovering, optimism over the US ‘fiscal cliff’ and easing of the EU debt crisis

By Crystal Hsu  /  Staff reporter

Cathay Financial Holding Co (國泰金控), the nation’s largest financial service provider by assets, said yesterday it expected GDP to increase 3.88 percent next year from an estimated 1.19 percent this year on the back of recovering external demand.

“The economic landscape is clear in the coming six months, with the exception of February, now that external demand has showed signs of a pickup,” said National Central University economics professor Hsu Chih-chiang (徐之強), who co-headed the quarterly research with Cathay Financial.

Hsu attributed the weaker February to fewer working days caused by the Lunar New Year holidays.

Exports are expected to drive 57 percent of the GDP growth and push private investment back to positive territory after two consecutive years of contraction, Hsu said.

The economic gauge looks set to rise between 3.25 and 4.15 percent next year, the economist said.

The forecast means Cathay Financial is slightly more optimistic than the government.

The Directorate-General of Budget, Accounting and Statistics (DGBAS) projected last month that the nation’s GDP would expand by 3.15 percent next year, from 1.13 percent this year.

“We believe China is on track for strong recovery, while the US will resolve the crisis over the fiscal cliff and European debt problems will ease a bit,” Hsu said.

However, private consumption is likely to remain weak next year, weighed by a stagnant job market, real wage declines and unease over unfavorable policy changes governing pension fund payments, the academic said.

Retail and wholesale revenues retreated 0.82 percent for the first 10 months, compared with an average of 4.3 percent increase for the past two years, Cathay Financial said.

The government can help bolster the sentiment by adopting measures to encourage private investment, Hsu said.

Measures to facilitate the creation of an economic free zone and the Taoyuan Aerotropolis project will decide whether private investment can reverse two years of decline, and so will incentives for the repatriation of Taiwanese capital, he said.

Against this backdrop, the central bank may want to hold the benchmark rediscount rate steady at 1.875 percent during its quarterly board meeting on Wednesday, Hsu said.

The easy monetary stance at home and abroad has induced a rebound in risk appetite, as evidenced by recent market rallies, he said.

However, Cathay Financial revised down its forecast for GDP growth this year to 1.19 percent, from the 1.47 percent it predicted in September, after major bellwethers turned out softer than expected.

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