Cathay Financial Holding Co (國泰金控) yesterday retained its forecast of 2.1 percent GDP growth this year, but warned that the economy is to lose steam next quarter on fragile leading indicators and domestic consumption.
Although domestic momentum might slow, robust overseas demand and increased activities in the electronics sector might help the economy expand next quarter, a joint statement released by Cathay Financial and National Central University said.
Inflation is expected to grow 1 percent annually this year, economists from Cathay Financial and the university said, matching the previous estimate in March.
“The nation’s economic climate might turn cloudy in the third quarter... The growth momentum might diminish month-by-month, but we are not concerned about a contraction, because the likelihood of such a scenario is small, only 10 percent,” the statement said.
For the full year, Taiwan has an 80 percent chance to see its economy expand by between 1.6 percent and 2.5 percent annually, thanks to stronger economic prospects in the US, China and the eurozone, the economists said.
The central bank is likely to tighten monetary policy later this year, given that there is a 50 percent chance the US Federal Reserve will hike key interest rates once by the end of this year, they said.
The bright spot is that the New Taiwan dollar might stabilize against the US dollar, ending an upward trend since the beginning of this year, they said.
A 6 percent appreciation of the local the currency versus the greenback in the first quarter wiped out NT$47.8 billion (US$1.57 billion) in income among locally listed companies, excluding financial institutions, Financial Supervisory Commission statistics showed.
The NT dollar yesterday rose NT$0.029 to NT$30.442 against the US currency.
Separately, private think tank Taiwan Research Institute yesterday raised its economic growth forecast by 0.27 percentage points to 2.01 percent.
However, the institute said the figure lags behind the global average of 3 percent, blaming the weakness on stagnant private consumption and investment.
Domestic consumption and private investment are to play a smaller role in boosting GDP, the institute said.
Domestic consumption and private investment are to account for smaller shares of 55 percent and 23 percent respectively this year, compared with their peaks of 66 percent and 35 percent, the institute said.
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