Cathay Financial Holding Co (國泰金控), the nation’s largest financial service provider by assets, yesterday raised its forecast for the nation’s GDP growth to 4.23 percent this year, up from the 3.88 percent it previously forecast, on the back of stronger export prospects and fewer downside risks.
“The ‘golden cross’ — whereby GDP growth rises over 4 percent and the jobless rate drops below 4 percent — is likely to materialize” this year if the labor market adds 150,000 jobs, said National Central University economics professor Hsu Chih-chiang (徐之強), who co-headed the quarterly research with Cathay Financial.
Newly installed Council for Economic Planning and Development Chairman Kuan Chung-min (管中閔) said on Feb. 18 the agency would strive to achieve the employment goal this year.
Hsu attributed his optimism to receding downside risks over the global economic outlook although he added that the risks have not altogether dissipated.
The improving global economic sentiment could have a positive impact on the nation’s exports, which could stage a 7 percent rebound this year from last year, better than the 6.35 percent increase forcaset by the government’s statistics agency, Hsu said.
Stronger export outlook underpinned Cathay Financial’s more positive growth forecast, Hsu said, compared with the government’s estimate of 3.59 percent.
Unemployment, which stood at 4.16 percent in January, could be kept at about 3.98 percent this year with the creation of 150,000 jobs, Hsu said, saying that the goal was achievable, given an annual average of 194,000 jobs created for the past three years.
An increase in exports would lend support to consumer spending, which would in turn boost private consumption, said the economist, who expected the latter measure to pick up 2.5 percent this year, from a sluggish 0.14 percent growth last year.
Economic impacts from the US, China and the Eurozone could still derail Taiwan from its mild recovery, Hsu said.
If US spending cuts squeeze 0.5 percentage points from its economy and China fares badly, Taiwan may suffer, with GDP growth falling to about 3.6 percent, Hsu said, adding that European debt problems could cause problems despite recent positive moves.
Against this backdrop, the central bank is likely to hold interest rates steady this year and the local currency is likely to remain relatively stable compared with other Asian currencies, Hsu said.
“The central bank has shown a consistent dislike for drastic volatility for the New Taiwan dollar and may step in to maintain stability if necessary,” Hsu added.