Tue, Dec 16, 2014 - Page 13 News List

Cathay Financial revises GDP forecast downward

RISING TIDES:Amid the threat of negative effects from China and a weakening yen, the nation’s estimated growth could drop below Taipei’s targets, a researcher said

By Camaron Kao  /  Staff reporter

Cathay Financial Holding Co (國泰金控) yesterday predicted that GDP growth would slow to 3.22 percent annually next year from this year’s 3.52 percent, due to dwindling private consumption and slowing overseas demand from China.

Next year’s estimate is below the government’s 3.5 percent projection.

China’s economic growth next year is expected to be lower than this year’s, while economies in Europe and Japan are also likely to remain weak next year, Hsu Chih-chiang (徐之強), an economics professor at National Central University, told reporters. Hsu is also a member of Cathay Financial’s research team.

Citing the latest data compiled by the team earlier this month, Hsu said Taiwanese consumers became less willing to spend because of low confidence in the nation’s economic growth alongside poor prospects of salary increases.

In addition, the Japanese yen’s weakening against the US dollar would add additional pressure on Taiwan’s GDP by cutting economic growth by 0.1 percentage point next year, Hsu said.

Meanwhile, a free-trade agreement between China and South Korea is expected to pose a threat to Taiwan’s economy when it takes effect, possibly as early as next year, Hsu said.

“Although the agreement might not have a severe impact on trade, Taiwanese firms are likely to shift their future investments to China from Taiwan because of the agreement, dragging down domestic economic growth,” he said.

Hsu predicted that Taiwan’s economic growth next year would reach 3.9 percent annually in the best-case scenario, while the worst would be an expansion of 2.7 percent annually.

If the US Federal Reserve does not raise its interest rates while major economies extend their easing monetary policies, the nation’s GDP would grow at the faster rate, Hsu said.

Economic growth would fall to the worst-case scenario next year if private consumption of durable goods — especially cars and houses real estate — drops as the public becomes uncertain about government policies that could follow the presidential election in 2016, Hsu said.

Hsu said the central bank is likely to maintain unchanged its interest rate during its latest quarterly meeting on Thursday.

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