The nation’s GDP may grow less than 2 percent this year, if the second half of the year sees a worse-than-expected recovery as a result of China’s slowing economy and domestic policy factors, according to the latest report issued yesterday by Cathay Financial Holding Co (國泰金控).
Cathay Financial, one of the nation’s largest financial services providers, yesterday revised downward its GDP growth forecast for this year to 2.27 percent, from the 4.23 percent it estimated in March, as the momentum of the economy was weaker than expected.
The financial services provider’s forecast was lower than the growth of 2.4 percent forecast by the Directorate-General of Budget, Accounting and Statistics last month.
In addition, Cathay’s research team set its interval forecast for the nation’s economic growth this year at between 1.89 percent and 2.94 percent, Cathay Financial said in a report.
“Our latest forecast indicates that achieving growth of 3 percent this year may be challenging,” National Central University economics professor Hsu Chih-chiang (徐之強), who is the joint leader of the team, told a media briefing.
In line with trends in the global economy, Taiwan’s tentative economic recovery is broadly on track, although the pace of recovery remains slow, Hsu added.
Taiwan’s economic sentiment may improve in the second half of this year, with the US’ fiscal issues, China’s economy and domestic policy factors such as increases in electricity prices and the results of pension reform proposals, being the main areas of uncertainty, the report said.
Hsu said the central bank may have more leeway to cut policy rates under current sluggish economic conditions and the lower-than-expected inflationary pressure.
Furthermore, revisions to the capital gains tax on securities investments, which may become effective soon, could increase consumer confidence in the stock market, adding upward economic momentum for the rest of the year Hsu said.
Hsu said improvements in the stock market may lead the central bank to keep policy rates on hold at its board meeting later this month.
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