GDP likely to dip to 2% next year: Cathay Financial

TOO OPTIMISTIC?:While the DGBAS has forecast that the local economy should grow 2.58% next year, most research institutes have predicted GDP growth of 1.6 to 2.5%

By Kao Shih-ching  /  Staff reporter

Tue, Sep 10, 2019 - Page 12

Taiwan’s growth is expected to slow from 2.2 percent this year to 2 percent next year, as domestic investment, the main pillar of GDP growth this year, decelerates, Cathay Financial Holding Co (國泰金控) said yesterday.

The prediction contradicts a forecast by the Directorate-General of Budget, Accounting and Statistics (DGBAS) last month, which said the local economy was expected to rebound next year, with annual growth of 2.58 percent compared with 2.46 percent this year.

“The DGBAS expected domestic investment to remain strong and exports to recover next year, both of which would give new momentum to the local economy. However, it seemed to us that the agency was being too optimistic,” said Hsu Chih-chiang (徐之強), a National Central University (NCU) economics professor who heads a research team commissioned by Cathay Financial.

Thanks to returning Taiwanese companies, domestic investment reported year-on-year advances of 7.04 percent and 6.48 percent in the first and second quarters respectively, reaching comparatively high levels, Hsu said, citing the DGBAS data.

“Investment will continue to grow in the second half of this year and into next year. However, due to this year’s high comparison base, it is more likely that investment will report a smaller increase year-on-year in 2020,” Hsu said.

Hsu’s team predicted investment growth of 2.03 percent for next year, compared with the annual growth of 3.56 percent forecast by the DGBAS.

The NCU team provided a more conservative outlook on exports amid a slowdown in global growth and the US-China trade dispute, saying that trade tensions, which are unlikely to ease by the end of this year, would continue to weigh on the nation’s exports.

Most research institutes have forecast GDP growth of 1.6 to 2.5 percent in Taiwan next year, leaving the DGBAS’ prediction as the most optimistic, Hsu said.

Cathay Financial retained its 2.2 percent economic growth forecast for this year, with 2.12 percent growth in the first half and 2.3 percent in the second half.

The central bank is expected to keep its policy rates unchanged during its quarterly board meeting later this month and in its December meeting, as inflation in Taiwan is low and whole-year GDP growth is decent, but the possibility of an interest rate cut could increase if an economic slowdown occurs next year, Hsu said.

Despite the government urging companies to repatriate their overseas funds, there are not enough good investment targets in the home market, Cathay Financial chief investment officer Sophia Cheng (程淑芬) said, adding that the government should review its regulations on capital repatriation.