British banking group Barclays PLC yesterday hacked its forecast for GDP growth in Taiwan by 1.7 percentage points to 2 percent for this year, after poor exports dragged down the nation’s showing in the second quarter and might continue to weigh it down.
“Exports cut more deeply into growth last quarter, meriting a significant downward revision,” Barclays senior regional economist Leong Wai Ho (梁偉豪) said in a research note.
Taiwan turned out not to be immune to a slowdown in industrialized Asia, as evidenced by poor exports that subtracted 0.9 percentage points from growth last quarter, the economist said.
The government’s advance reading for GDP growth printed 0.64 percent during the April-to-June period, the Directorate-General of Budget, Accounting and Statistics said last week and is due to update its growth projection later this month.
The figure is markedly weaker than the forecast by Barclays of 3 percent and the market consensus of 2.6 percent, Wai said.
Wai attributed the disappointing data mainly to a more gradual recovery in the US and outages at petrochemical exporters.
Compounding the headwinds was the persistent inventory overhang in electronics, which is now prompting technology companies to temper their expectations for a more modest pickup in the second half, the economist said.
Barclays stood by its expectation of a moderate acceleration in business activity in coming quarters, aided by new electronics product launches and generally steadier support from the US and Europe.
Against the current backdrop, the central bank would keep its loose monetary policy for a while longer in order to support economic growth, Wai said.
“As such, we push back our rate normalization forecast by two quarters and now expect the first rate hike of 12.5 basis points in June next year,” he said, adding the bank could raise the level of excess liquidity in the coming months.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
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