Cathay Financial Holding Co (國泰金控) yesterday slashed its GDP growth forecast for Taiwan this year from 2.1 percent to 1.6 percent, citing softening exports, falling oil prices, and weak economic growth in China and across the globe.
The revised figure is still higher than the 1.47 percent forecast by the Directorate-General of Budget, Accounting and Statistics (DGBAS).
“Perhaps our team’s findings is a reflection of optimism about the presidential handover,” National Central University economics professor Hsu Chih-chiang (徐之強) said, referring to president-elect Tsai Ing-wen (蔡英文), who is to be sworn in on May 20.
In addition, Cathay Financial’s figure compares to a median of 1.7 percent and an average of 1.8 percent compiled from a survey of 31 financial institutions, Hsu said.
However, Cathay Financial is less optimistic about other metrics than the DGBAS, predicting a 1.9 percent rise in gross investments and a 2.67 percent gain in imports, compared with the 2.57 percent and 2.97 percent forecast by the DGBAS respectively, he said.
‘GLOOMY’
The nation’s economic climate is expected to remain “gloomy,” Hsu said.
Despite two sequential gains in quarterly GDP performance since the third quarter of last year, a significant recovery is not expected to take hold until the third quarter of this year, he added.
Hsu’s team pegged GDP growth for this quarter at 0.44 percent, and 0.43 percent for the second quarter, while monthly performance is expected to continue logging sequential gains through June.
Despite his team’s optimism, Hsu said that economic growth in the second half of this year must exceed 3 percent, or Cathay Financial would have to revise down its forecast during the third quarter.
He said that GDP growth still declined on a year-on-year basis in the first quarter, and that while the figure is expected to post an annual gain in the second quarter, growth recorded in the April-to-June period would be nullified by the lackluster performance in the previous period.
LOW BASE
Hsu added that there is a good chance for the nation to achieve economic growth of 3 percent in the second half due to a low base last year.
Regarding oil prices, Hsu said that the consensus among international brokerages is that the recent rally would be short-lived, with prices expected to return to a range of US$40 to US$50 by the end of this year.
An oversupply of oil, which outpaces demand by 1.75 million barrels daily, is expected is expected to persist until next year, Hsu said, citing estimates by the US Energy Information Administration.
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