Tue, Aug 02, 2016 - Page 12 News List

Foreign bank cuts economic growth projection to 0.7%

LACKLUSTER:Few signs of a demand recovery in major markets like the US and China would continue to affect Taiwan’s exports, Standard Chartered said

By Ted Chen  /  Staff reporter

Standard Chartered Bank yesterday lowered its forecast for the nation’s GDP growth this year to 0.7 percent, down from the 2 percent it predicted six months ago, as weak external demand continues to stifle exports.

“[A] persistently listless external [sector] is the greatest downside risk for Taiwan, as weak external demand has led to 17 consecutive months of declining exports,” said Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered Bank.

Signs of a demand recovery remain scarce in major markets, including China and the US, clouding prospects of export growth for Taiwan, Phoo said, adding that economists have slashed global GDP growth from 2.5 percent to 2.4 percent.

In particular, global demand for technology products and mobile devices, which makes up about a quarter of Taiwan’s exports, has remained weak, he added.

Apart from exports, public confidence in domestic consumption and investments may have been shaken by uncertainties in cross-strait relations and a continued slump in real-estate prices, as well as widening volatility in the equities markets, Phoo said.

He added that the new government is not likely to produce immediate economic boosts, as its new policies are aimed at developing new industries, such as green energy and long-term elderly care and tapping into other Asian markets, as opposed to yielding short-term gains from stimulus packages.

“The worst has passed, as Taiwan’s economic cycle has reached a trough in the third quarter of last year following three consecutive quarters of GDP contraction,” Phoo said.

Taiwan’s economy is expected to see gradual growth ahead, as concerns about the US and Chinese economies diminish, he said.

The US Federal Reserve is not likely to raise interest rate this year, while China is on track to avoid a hard landing as it implements an economic transformation, Phoo said.

However, while China is Taiwan’s most vital export market, Taiwanese companies are expected to face heightened competition from Chinese rivals, as the country’s technology sector climbs higher in the global value chain, Phoo said.

In related news, DBS Bank yesterday maintained its 0.9 percent GDP growth forecast for Taiwan this year.

The Singaporean bank said that recent economic data were not all discouraging, as exports of goods and services had stopped falling and posted growth of 0.7 percent year-on-year at the end of the second quarter.

“We expect GDP growth to remain modest at 1 to 2 percent in the second half, while exports and manufacturing production should continue to grow, thanks to the upcoming peak season for electronics,” DBS said in a report.

However, companies are likely to remain cautious about investment and hiring, giving lingering business uncertainties related to Brexit and a slowdown in emerging markets, leading to lackluster demand in the second half, DBS said.

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