The nation’s economy is expected to grow 2.3 percent next year, decelerating from 2.5 percent this year, as domestic investment slows and US-China trade tensions continue to cloud exports, Cathay Financial Holding Co (國泰金控) said yesterday.
The company’s latest forecast is better than its September prediction of a 2.2 percent increase this year and 2 percent growth next year.
The upward revision came after the Directorate-General of Budget, Accounting and Statistics (DGBAS) on Nov. 29 revised average economic growth between 2012 and last year from 2.33 percent to 2.73 percent, Cathay Financial said.
However, its forecasts are still lower than the DGBAS’ forecast of a 2.64 percent increase this year and 2.72 percent growth next year.
“We are more conservative about next year than the DGBAS, as a high degree of economic uncertainty is likely to continue to affect the local economy,” said Hsu Chih-chiang (徐之強), an economics professor at National Central University who heads a research team commissioned by Cathay Financial.
The largest divergence between Cathay’s and the DGBAS’ predictions was in domestic investment, the main pillar of GDP growth this year, Hsu said.
Cathay Financial has forecast that domestic investment would grow 2.72 percent next year, while the DGBAS has said that it would grow 4.71 percent, he said.
“Domestic investment is likely to register a 7 percent increase for the whole of this year, which is rosy, but also forms a high comparison base. It will be difficult to maintain such a fast pace next year,” Hsu said.
Investment in 5G wireless technology is expected to boom next year, as Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) plans to spend US$14 billion to US$15 billion on capital expenditure, Hsu said.
Cathay Financial is also conservative about investments by Taiwanese companies returning home, as some might prefer to move to Southeast Asia or review their plans due to a slowing global economy, chief investment officer Sophia Cheng (程淑芬) said.
Exports, which declined 1.9 percent annually in the first 11 months of this year, would rebound next year on a low comparison base, but they are expected to improve only slightly due to a slowdown in China and the US, the largest two markets for Taiwanese goods, Hsu said.
Whether the Chinese economy would grow more than 6 percent next year poses the greatest risk to Taiwan’s exports, Hsu said, adding that market consensus is that China would grow 5.8 to 5.9 percent next year.
China and the US are expected to sign a “phase one” trade deal next month, but the trade tensions between them are unlikely to end smoothly, Hsu said, adding that signing a “phase two” agreement depends on how they honor their commitments.
The central bank is expected to keep its policy interest rates unchanged next year and the inflation rate is likely to stay below 1 percent, Cathay Financial said.
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