Singapore’s DBS Bank yesterday slashed its estimate for Taiwan’s GDP growth to 2 percent this year, from a previous estimate of 2.6 percent, and Paris-based Societe Generale trimmed its forecast to 2.3 percent, from 2.5 percent, they said in separate reports.
The reports came after the Directorate-General of Budget, Accounting and Statistics (DGBAS) on Thursday said the economy grew a disappointing 1.58 percent during the July-to-September period, lower than its projection of 2.47 percent in August and the market consensus at 2.44 percent.
“The third-quarter disappointment came mainly from exports, which slowed to 1.7 percent from 5.1 percent on average in the preceding two quarters,” DBS said.
There is no denying that China’s slowdown has hurt Taiwan’s export sector seriously this year, the bank’s report said.
China, which accounts for 40 percent of Taiwanese exports, will continue to focus on economic reforms in the foreseeable future by adopting measures to boost domestic demand, upgrade industrial technology and develop the services sector, DBS said.
Consequently, Taiwanese manufacturers that rely on the traditional model of processing trade in China will face the risk of losing competitiveness, the bank cautioned.
It will take Taiwanese firms some time to shift their business strategy to take advantage of China’s domestic market, further technology advancement, and enhance services trade with China, DBS said.
“We are seeing a structural slowdown in China and reform needs to progress” after Chinese leaders pledge to stabilize growth and deflate debt risk at the same time, Societe Generale chief economist Michala Marcussen told a media briefing in Taipei.
While China may not see a hard landing, it is going through a bumpy landing, Marcussen said.
The US is faring above trend, but politics remain a challenge, while the EU is exiting a recession, but investment and credit growth is still lacking, she said.
Therefore, emerging Asian economies closely linked to China and the West should be able to avert a full-blown crisis thanks to better fundamental balances, she added.
Meanwhile, Moody’s Analytics said Taiwan is losing its identity and growing too dependent on China, while improved economic relations have done little to help stagnant wages and the deficiencies in its economy.
Rather, fewer job opportunities have led skilled workers to head offshore and the government’s economic stimulus package has done little to cushion the economy from weak global demand, Moody’s said.