UK-based Standard Chartered Bank (SCB, 渣打銀行) yesterday slashed its forecast for Taiwan's economic growth this year to 2.8 percent from 3.8 percent, predicting a hit on the nation's exports by an economic slowdown in the US and China.
"We forecast that Taiwan's economic growth for the whole year is likely to slide to 2.7 percent or 2.8 percent over the worse-than-expected impact from the US recession and the inevitable hit on Chinese exports, which will slow growth there," SCB economist Tony Phoo (符銘財) said at a press briefing yesterday.
SCB's was the most bearish projection so far made by an investment banks or global research institute. Forecasts by Global Insights and the IMF for Taiwan's GDP growth this year are 4.6 percent and 3.8 percent respectively.
"Information technology companies are major contributors to Taiwan's exports, with 60 percent to 70 percent of them manufacturing their products in China and shipping a large percentage of that production to US markets," Phoo said. "With the US market heading for recession, the drop in demand amid a widening subprime contagion is going to hurt export industries."
The Directorate General of Budget, Accounting and Statistics has put the nation's economic growth forecast this year at 4.53 percent, while projections by local think tanks were from 4.16 percent to 4.39 percent as of Sunday.
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"The impact of the US market is not as great as that before 2000, because the US only accounts for 12.7 percent of our exports, while China and Hong Kong together take up 41 percent," Chinatrust Commercial Bank (中國信託商業銀行) economist Alan Liao (
"Meanwhile, let's not forget that any improvement in Taiwan-China relations will give the Taiwanese economy a boost," Liao said.
He said measures such as direct flights between Taiwan and cities in China, as well as opening the market for Chinese tourists, could add 0.3 to 0.5 percentage points to the economic growth in the second half of this year.
"Our forecast for Taiwan's economic growth this year remains unchanged at 4 percent," Liao said.
Phoo, however, said that improved cross-strait relations were unlikely to be reflected in the economy this year.
"The new president takes office on May 20 and it takes months to complete the negotiations to [change policies]. We may have to wait until next year for these measures to start having a significant effect on the economy," Phoo said.
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