Taiwan’s economy might grow 2 percent next year, with the central bank likely to cut interest rates twice in the first half, as external demand could remain sluggish amid a continuing global slowdown, Australia and New Zealand Banking Group (ANZ) said yesterday.
“Taiwan’s GDP will only rise modestly by 2 percent next year, with first-half growth still struggling to beat 1 percent,” ANZ Hong Kong-based economist Raymond Yeung (楊宇霆) said in a report.
ANZ’s forecast is lower than the government’s projection last month of a 2.32 percent increase in GDP next year.
Yeung said that global commodity prices would continue to weigh on the nation’s petrochemical sectors, while monetary policy divergence among major central banks would foster fluctuations and risks in financial markets.
Exports could total US$302 billion next year, in line with the average level of the past five years, he said.
However, China, the largest destination for Taiwanese exports, appears to be proceeding with structural economic reforms and its shift toward a service-oriented economy means less imports from Taiwan, though the nation might benefit from the reforms in the medium term, ANZ said.
Increasing competition from Chinese companies might reduce Taiwan’s exports to affiliated firms in China, Yeung said, adding that Chinese firms might tap more talent and service inputs from Taiwan.
Overall, Taiwan’s GDP declines 0.37 percent for every 1 percent drop in China’s industrial production, ANZ said.
The bank forecast that China’s economy would increase 6.4 percent next year, after estimating a 6.8 percent rise for this year.
The bank highlighted an overconcentration risk in Taiwan’s economic structure, saying the local manufacturing sector has been highly sensitive to the global supply chain and the technology cycle.
Given the circumstances, the central bank might cut interest rates more aggressively next year, by 12.5 basis points in both March and June, Yeung said.
Consumer prices could increase 0.8 percent next year, Yeung said.
That could allow room for monetary easing to stimulate growth, he added.
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