Citigroup Taiwan yesterday lowered its forecast for the nation’s GDP growth from its previously-estimated 4.5 percent to 4 percent this year on a slowdown in the US economy, which it expects to continue for between another six months to a year.
Citigroup forecasted the US economy would drop to 0.8 percent and 0.9 percent respectively this year and next year from the previously-estimated 1.6 percent and 2.1 percent.
As the market speculated that the Federal Reserve’s interest rate cuts have neared an end, Citigroup said it did not expect the US economy to recover in the short-term.
“The worst is over, but the best has yet to come,” Cheng Cheng-mount (鄭貞茂), Citigroup’s vice president and chief economist, said at a media briefing yesterday.
Cheng said that, although the nation’s economic growth is expected to decline to an estimated 4 percent from last year’s 5.7 percent, it is also expected to rebound to 4.5 percent next year on the back of growing private consumption and capital investment.
High-tech sector exports, which will be the driving force behind the nation’s export growth, will offset the challenges of a rising consumer price index (CPI) and an expected export slowdown, Citigroup said.
Citigroup also lowered its GDP forecasts for leading industrial countries such as Japan and the UK 1.7 percent and 1.4 percent respectively, as global economic conditions remain tense.
On the interest rate front, Citigroup said the US Fed is likely to further cut its interest rate by 1.25 percentage points down to 1 percent in the third quarter.
They said that the greenback will pick up slowly in the fourth quarter.
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