Cathay Financial Holding Co (國泰金控) yesterday raised its forecast for Taiwan’s GDP growth this year to 3.59 percent, from 3.29 percent in June, on stronger domestic and external demand.
However, the economic growth might slow to 3.22 percent next year, when people might refrain from big spending amid expected interest rate hikes and the upcoming presidential election campaigns, the nation’s largest financial service provider said.
The central bank might raise interest rates at its board meeting in December, after keeping the rates unchanged next week, given the current benign inflationary pressures.
“We expect the economy to fare stronger this quarter” after GDP growth hit 3.74 percent year-on-year in the second quarter and 3.04 percent three months earlier, said Hsu Chih-chiang (徐之強), an economics professor at National Central University who is also on the research team.
The US economic recovery posted better-than-expected results in the second quarter, boding well for Taiwan’s exports, as evidenced by the 9.6 percent rise in exports last month to US$28.1 billion, thanks to inventory-building by major global technology giants, Hsu said.
Last week, Apple Inc unveiled its latest smartphones and other devices — to be available later this month — which are likely to boost business for local firms in the tech giant’s supply chain, Hsu said.
Hon Hai Precision Industry Co (鴻海精密) is the major assembler of Apple Inc’s iPhone, Largan Precision Co (大立光) supplies handset camera lenses and Simplo Technology Co (新普科技) provides battery packs.
Cathay Financial expects GDP growth to slow somewhat in the fourth quarter compared with the third quarter due to the high base, Hsu said, bucking the forecast by the government’s statistics bureau that the final quarter would prove the strongest this year.
That means the ongoing tainted lard oil scandal would have a very limited impact on the economy because there are alternative products, he said.
Hsu said the central bank is unlikely to raise interest rates during its board meeting next week simply because the consumer price index exceeded the 2 percent level last month. Rather, it would raise rates in December at the earliest, as the economy shows improved recovery, he said.
The US Federal Reserve is unlikely to increase interest rates until the middle of next year, allowing that country’s job market more time to improve, Cathay Financial said.
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