Tue, Jun 21, 2016 - Page 13 News List

Cathay Financial halves GDP forecast for Taiwan

By Ted Chen  /  Staff reporter

Cathay Financial Holding Co (國泰金控) yesterday halved its GDP growth forecast this year for Taiwan from 1.6 percent to 0.8 percent, due to expectations of continued weakness in exports and economic growth recovery around the world.

The revised figure is lower than the 1.06 percent growth forecast by the Directorate-General of Budget, Accounting and Statistics (DGBAS) last month.

“We hold a more reserved outlook on the nation’s GDP growth in light of consecutive double-digit declines in exports during the January-to-May period,” said Hsu Chih-chiang (徐之強), an economics professor at National Central University and a leader on the Cathay Financial research team.

“While the DGBAS gauged the nation’s economic contraction in the first quarter at 0.1 percent, our findings suggest a 0.5 percent dip,” Hsu said, adding that the 0.8 percent growth for this year would require growth of at least 2 percent in the second half.

The World Bank and the IMF have slashed global economic growth this year to 2.4 percent from 2.9 percent and from 3.4 percent to 3.2 percent respectively, in light of less-than-expected growth momentum in both developed and developing economies, Hsu said.

However, the worst of the downturn might be approaching its end for Taiwan, as signaled by the National Development Council’s monitoring indicators, which last flashed a sluggish “yellow-blue” in April, ending a 10-month streak of recession “blue.”

Taiwan’s GDP growth in the third quarter is anticipated to recover slightly to 0.26 percent, as export order volume visibility in South Korea, Taiwan and China have shown slight upticks.

Taiwan’s central bank is also expected to remain dovish, in line with continued easing policies implemented by its peers in South Korea and Japan, increasing the likelihood of a weakening New Taiwan dollar, the economics team said.

Despite the reserved outlook, the economics team has set the GDP growth range at between 0.6 percent and 1.1 percent, adding that there is little chance of contraction.

Public confidence in the nation’s economy this month reached the highest in the past year, Cathay Financial’s monthly survey showed.

Although the reading remained low, the economic optimism index rose to minus-8.5 this month, rebounding from minus-23.7 last month, while readings of optimism on wage growth and employment have also shown upticks.

Optimism this month on the TAIEX’s performance and risk appetite has also risen to a new high in the past year at minus-13.3 and minus-9.8 respectively, with a majority of 45.7 percent of respondents expecting the local bourse to peak this year at 8,400 to 8,800 points, the survey showed.

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