Citibank yesterday lowered its GDP growth forecast for Taiwan to 2.8 percent this year, down from the 3.3 percent it projected in May, as major economic data proved to be weaker than expected, with the trend likely to extend into the second half of the year.
The US banking group also expects the eurozone’s debt problems to worsen, which in turn would further drag down the global economy and to China’s — the major destination for Taiwanese exports.
“We cut the GDP growth forecast for Taiwan to 2.8 percent, from 3.3 percent estimated in May, to reflect disappointing data,” Taipei-based chief economist Cheng Cheng-mount (鄭貞茂) told a media briefing.
Cheng said the revision has not yet factored in last month’s export figures, which contracted for the fourth consecutive month to US$24.36 billion, down 3.2 percent from a year earlier and 6.6 percent from May, based on the Ministry of Finance’s report on Monday.
While Citibank maintains the view that Taiwan’s export-oriented economy will put up a better performance in the second half of the year, it does not rule out the possibility of further downward adjustments as the global slowdown pans out, Cheng said.
“Recovery appears on track, but the pace may be slower,” he said. “Major economic data have not yet stabilized given their choppy monthly readings.”
Citibank now expects Taiwan’s GDP to have expanded only 1 percent during the second quarter, up from a 0.4 percent pickup in the first quarter. The economy may grow by 4 percent this quarter and accelerate to a 5.7 percent increase in the fourth quarter on the back of demand for next-generation electronic products, Cheng said.
However, he voiced concern that firms might reduce orders next quarter, the high season for consumer electronics, if markets prove lukewarm this quarter.
Taiwan is home to leading PC brands, such as Acer Inc (宏碁) and Asustek Computer Inc (華碩電腦), as well as top contract laptop makers like Quanta Computer Inc (廣達), Compal Electronics Inc (仁寶) and Wistron Corp (緯創).
All expect a revenue boost from the launch of Microsoft’s Windows 8 operating system later this year. Local companies in Apply’s supply chain are also looking to benefit from its new products.
Citibank is less upbeat about potential replacement demand with the European monetary bloc mired in fiscal woes and the US struggling to curb high unemployment, Cheng said.
Meanwhile, emerging economies — especially China — are shifting more focus to domestic demand to tame their own slowdown, the economist said.
Citibank trimmed its projection for China’s GDP growth from 8.1 percent to 7.8 percent as Beijing is preoccupied with a transfer of power, Cheng said.
It has maintained its forecast for Taiwan’s inflationary reading at a benign 1.9 percent this year with risks to the upside now that fuel prices have bottomed out and with food costs likely to climb further.