Wed, Jan 16, 2019 - Page 12 News List

Taiwan’s GDP growth might fall to 2.2 percent: DBS

By Kao Shih-ching  /  Staff reporter

Taiwan’s GDP growth might fall to 2.2 percent this year from 2.7 percent last year and could dip below 2 percent if exports continue to decline, DBS Bank (星展銀行) said yesterday.

Exports in November last year and last month unexpectedly logged monthly declines of 3.4 percent and 3 percent respectively, which were surprises for DBS, as it had forecast modest gains of under 1 percent, said Ma Tieying (馬鐵英), an economist at the Singapore-based lender.

“While both China and Taiwan saw surging exports in October as firms increased orders before the [US] tariffs took effect, such sharp declines in the following months were not expected,” Ma told the Taipei Times.

The severity of the US-China trade spat’s effects on Taiwan and China far exceeded the bank’s expectations, she added.

The US and China agreeing last month on a 90-day trade truce made it more difficult to forecast exports for the first quarter of this year, she said.

Taiwan’s short-term economic cycle might have reached its peak after three consecutive years of recovery, and GDP might begin retreating annually in the first half of this year, the bank said.

This year’s exports forecast might be revised down from 2.8 percent, due to continued turbulence from the trade dispute, an economic slowdown in China, technology cycle corrections and heightening volatility in emerging markets, it said.

There is a slim chance of Taiwan entering a recession this year, but GDP growth could be revised down to 1.5 to 2 percent if exports continue to deteriorate, Ma said.

Consumption is expected to remain stable from last year, while investment growth might decline from 2.9 percent last year to 2 percent, the bank said.

Given that government debt has dropped from a peak of 39 percent of GDP in 2012 to 36 percent in 2017, safely below the legally mandated ceiling of 50 percent, the government could consider conducting expansionary fiscal policy to stimulate the economy, it said.

The bank expects the nation’s benchmark interest rate to remain at 1.375 percent and inflation rate below 1 percent, it said.

The bank’s GDP forecast was in line with predictions from its peers, with the Taiwan Institute of Economic Research (台灣經濟研究院) forecasting 2.2 percent growth and the Chung-Hua Institution for Economic Research (中華經濟研究院) predicting 2.18 percent, while the IMF expects 2.4 percent growth.

Given the low possibility of a recession and sound corporate earnings, investors do not need to worry about global equity markets continuing to slump as they did in 1987, 2000 and 2008, DBS managing director Hou Wey Fook (侯偉福) said.

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