Research institutes have cut their forecasts for the nation’s GDP growth, which might struggle to stay above 3 percent this year after major economic barometers fared disappointingly in the first half.
Research institute Academia Sinica yesterday trimmed its projection to 3.24 percent from the 3.42 percent it estimated in December last year, citing weaker exports and private investment.
DBS Bank, the largest lender in Southeast Asia, made a larger downward revision, from 3.4 percent to 2.7 percent, on concerns over zero growth last quarter from three months earlier, while Australia & New Zealand Banking Group Ltd went even further, lowering its GDP growth forecast from 3.78 percent to 2.81 percent.
Daiwa Capital Markets Inc, which forecast economic growth of 3.2 percent this year, yesterday said it sees “downside risk” to its estimate, considering a slew of weaker-than-expected economic data.
‘POOR EXPORTS’
“The economy is likely to barely expand by 3 percent this year when factoring in the poor results for exports in June,” Academia Sinica research fellow Ray Chou (周雨田) said at a news conference.
Exports, which drove more than 70 percent of GDP growth in the first quarter, contracted 13.9 percent last month from a year earlier, as demand from all of the nation’s major trade partners declined by between 8 percent and 17 percent, the Ministry of Finance said on Tuesday.
GLOBAL ECONOMY
The disappointing results reflected a weak global economy, which cast a shadow over expectations of a significant improvement in the second half, Chou said.
Academia Sinica now expects exports to grow by a modest 4.53 percent from a year earlier, less than the annual increase of 4.69 percent that the Directorate-General of Budget, Accounting and Statistics (DGBAS) predicted in May.
“The ongoing inventory adjustment among local technology firms might extend through this quarter,” Chou said.
CRUDE PRICES
Falling crude oil prices will continue to affect exports of minerals, chemicals and plastics products, although the base effect has narrowed, he said.
Singapore-based DBS said the poor economic data merited a more drastic downgrade of its earlier forecast.
“Based on the latest export orders, industrial production and the purchasing managers’ index, growth in Taiwan may have fallen to zero” last quarter from three months earlier with the risk of turning negative, DBS said in a report.
Demand from China, Japan and Europe has deteriorated broadly due to the slowdown of the Chinese economy and depreciation of the yen and the euro, DBS said.
The exports outlook largely depends on a recovery in the US economy and a rebound in tech sector activity.
A Greek debt default would pose a fresh concern if market volatility in Europe increases and the real economy slows, despite Taiwan’s low exposure to Greece, DBS said.
DOMESTIC DEMAND
Economists have said that domestic demand is to grow at a healthy pace in the second half of the year, thanks to steady increases in employment and wages, but warned that this will not be adequate to offset the drag from exports.
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