The nation’s GDP is forecast to contract by 0.1 percent this quarter from last quarter due to lackluster exports, but the economy would resume growth next quarter on the back of strong investments, Cathay Financial Holding Co (國泰金控) said on Wednesday.
The projection was in contrast to the Directorate-General of Budget, Accounting and Statistics’ (DGBAS) forecast last month of a quarterly increase of 0.57 percent in GDP.
“We are less upbeat than the statistics agency,” Hsu Chih-chiang (徐之強), an economics professor at National Central University who led a research team commissioned by Cathay Financial, told a news conference in Taipei.
“Exports retreated bigger than expected in the first two months, which implied that the statistics agency might need to correct its forecast,” he said.
DGBAS predicted that first quarter exports would drop 2.81 percent year-on-year, but exports in the first two months already plunged 4.1 percent from the same period last year, he said.
“It is very difficult for exports to take a turn for the better this month, as exports in March last year hit US$29.98 billion, a record high for a single month,” Hsu said.
Taiwan’s exports last month contracted for the fourth consecutive month, showing the biggest annual decline of 8.8 percent over the past year, Ministry of Finance data showed.
Although the fractional decline in GDP could be a warning for the business cycle given that the nation has not seen quarterly declines in GDP for a few years, Hsu told the Taipei Times that he was not worried, as his team expects the economy to rebound next quarter with a quarterly growth of 0.61 percent.
“We do not expect Taiwan’s exports to improve in the following quarters amid uncertainties such as the US-China trade disputes or a hard Brexit, but the nation’s economy could be fueled by strong public and private investments,” Hsu said.
Cathay Financial forecast investment in Taiwan to grow 3.5 percent from last year, compared with the government’s 5 percent forecast.
The central bank would keep benchmarks rates unchanged this year, it said.
“If Taiwan’s GDP declines year-on-year for two quarters in a row, it is possible that the central bank would consider cutting the benchmark rates, but we think this is not likely to happen,” Hsu said.
Cathay Financial retained its GDP growth forecast for the year of 2.2 percent, he said.
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