Citibank Taiwan Ltd (台灣花旗) yesterday trimmed its GDP forecast for Taiwan to a contraction of 4.4 percent this year from a previous estimate of a 3.2 percent contraction on worse-than-expected exports in the first half of this year.
“The nation’s exports in the second quarter haven’t recovered as strongly as we had expected, which is the main reason behind our latest GDP forecast cut,” chief economist Cheng Cheng-mount (鄭貞茂) told a media briefing yesterday.
The economist said he had factored purchases by Chinese buyers, worth about US$2 billion, in the nation’s second-quarter exports, which will provide a limited lift to the nation’s export value, estimated at US$17 billion in June.
The bank in February cut its GDP forecast for this year from a minor 0.67 percent contraction to a 3.2 percent contraction after exports experienced an unprecedented 40 percent decline in the first quarter.
“We’ve just come out of the worst of the bottom and are now at the beginning of a slow U-shaped recovery,” Cheng said.
Still, Citi was relatively optimistic about the local economy for the second half of this year.
Cheng said exports should improve in the third quarter of this year, although year-on-year growth would not be possible because of a higher base at the same period last year, before picking up to average at US$20 billion per month in the fourth quarter of this year.
He forecast the nation’s exports would see a quarter-on-quarter growth of 12.5 percent in the third quarter and 2.9 percent in the fourth quarter.
The anticipated recovery, however, would be gradual, as world demand and domestic consumption remain weak.
“Not until recovery is seen in global markets will domestic consumption rise,” Cheng said, urging the government to use additional stimulus measures similar to the consumer voucher scheme launched earlier this year.
Unless global markets recover, the nation’s private investment will remain weak, which results from the nation’s deteriorating employment situation, he said, adding that Taiwan’s unemployment rate would average at 5.7 percent this year.
With inflation at a record low, Cheng said he did not expect central banks in export-oriented Asian economies — including Taiwan’s — to tighten credit by raising interest rates any time before the middle of next year.
Standard Chartered Bank chief economist Tony Phoo (符銘財) said on Tuesday he expected the central bank to keep its key interest rate at 1.25 percent.
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