Fubon Financial Holding Co (富邦金控), Taiwan’s most profitable financial service provider, yesterday said it did not expect the nation’s economic growth to exceed 1.8 percent or the local bourse to advance past 9,600 points next year, in anticipation of the global effects of US president-elect Donald Trump’s proposed policies.
Trump’s proposed policies aiming to boost US domestic spending and demand, while raising trade barriers would likely lead to three possible effects on Taiwan’s economic growth, Fubon Financial economist Rick Lo (羅瑋) said at a forum.
The most likely scenario, with a 60 percent probability, would be that US protectionism would sow additional uncertainties, while efforts at terminating or renegotiating trade deals are expected to sour international relations, Lo said.
As a result, investments and consumer confidence would be affected, because US public spending plans would be unable to stimulate enough growth to make up for an anticipated slump in overseas earnings contribution from US technology and services companies, Lo said.
Taiwan’s GDP is expected to reach 1.5 percent, while US growth would likely be limited to 1.8 percent.
The worst outcome, with a 30 percent probability, would see political upheaval rise amid growing nationalism across Europe, as well as escalating disputes about international trade terms, Lo said.
In that case, Taiwan’s GDP would be dragged to about 1 percent, Lo said.
The most favorable outcome, with only a 10 percent probability, would see all international trade disputes averted, with Taiwan’s GDP grow 1.8 percent, buoyed by a continued and gradual global economic recovery, Lo said.
Lo said that while it is still too early to get a clear picture, Trump’s policies could reverse low interest rates, low growth and low inflation conditions that have persisted since the 2008 global financial crisis.
He said that global economic growth would likely pick up next year as the US implements more fiscal policies in place of monetary easing, while developing markets are likely to benefit from increasing commodity prices as more government spending in the US and China increases demand.
Meanwhile, the TAIEX could rise to 9,600 points next year, as the price-to-book value ratio of the nation’s listed companies rises to between 1.4 and 1.7, Fubon Securities president Charles Hsiao (蕭乾祥) said.
However, amid tepid international demand, profits would be concentrated in the top 10 percent, or 163 companies, as competition from Chinese rivals increases, Hsiao said.
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