DBS expects Taiwan to show third-quarter economic contraction

Staff writer, with CNA

Mon, Oct 26, 2015 - Page 13

Taiwan is expected to report an economic contraction in the past quarter due to worse-than-expected export performance amid slowing global demand, DBS Bank Ltd said.

The Singaporean bank said that the GDP for the July-to-September period is likely to have contracted by 0.3 percent from a year earlier, lagging behind its earlier forecast of a 0.6 percent increase because of falling exports and declining industrial production.

DBS is not the only institution predicting an economic contraction for the third quarter.

On Oct. 15, the Chung-Hua Institution for Economic Research (中華經濟研究院) forecast that GDP could contract by 2.11 percent last quarter from a year earlier, while slashing its economic growth forecast for this year to 0.9 percent, from the 3.04 percent it predicted in July.

Due to the disappointing economy in the third quarter, DBS said it is possible that Taiwan’s economy for this year will grow weaker than its previous estimate of 1.4 percent expansion.

Yuanta Securities Investment Consulting Co (元大投顧) last week said the nation’s GDP is unlikely to grow above 1 percent this year because of the high base effect last year and companies’ lower capital expenditures amid financial market turbulence.

The Directorate-General of Budget, Accounting and Statistics in August forecast that the economy would grow 0.1 percent in the third quarter and 1.56 percent for the full year.

The agency is due to release third-quarter results and update full-year figures on Friday.

DBS said peak season effects in the global tech business would help Taiwan’s outbound sales regain momentum, with rising demand for smartphones likely serving as a driver for economic growth.

As the US Federal Reserve is likely to delay an interest rate hike cycle until next year, the global financial market could faces less downside risks this quarter and consumption and investment in Taiwan could grow from last quarter, DBS said.

DBS retained its GDP growth estimate of 2.9 percent for next year, compared with Citigroup Inc’s 2.4 percent forecast.