Taiwan’s economy is likely to expand 3.5 to 4 percent next year, Fubon Financial Holding Co (富邦金控) said yesterday, adding that the situation would depend on the effectiveness of COVID-19 vaccines and their delivery worldwide.
Fubon Financial’s base-case scenario assumes that an effective COVID-19 vaccine would be developed by the end of June next year, but would not be distributed around the globe due to allocation issues or would be rejected by US citizens, chief economist Rick Lo (羅瑋) told an economic forum in Taipei.
In that case, the COVID-19 pandemic would be unlikely to slow down, since there would be no herd immunity as people would not get vaccinated, Lo said.
Photo courtesy of Fubon Financial Holding Co
Taiwan’s GDP growth, which is forecast to grow at least 2 percent year-on-year this year, would continue growing next year, with an expected gain of 3.5 percent in the base-case scenario, as the spread of the novel coronavirus has been curbed domestically and local technology firms are to benefit with more companies digitalizing their businesses, he said.
China’s economy is likely to register an annual increase of 7.8 percent, followed by annual rises of 5 percent in Europe, 3.7 percent in the US and 2.3 percent in Japan, Lo said.
A more positive scenario assumes that a viable vaccine would be developed by the end of the second quarter of next year and distributed worldwide by the end of the third quarter, which would raise US economic growth to 4.5 percent, with other countries benefiting as well, he said.
Taiwan’s economy would also benefit from improvement abroad and would likely report an annual gain of 4 percent, Lo said.
“Given that the Directorate-General of Budget, Accounting and Statistics on Friday predicted an annual rise of 3.83 percent for Taiwan’s economy next year, I think the agency’s optimism might fall between our two scenarios,” Lo said.
The worst-case scenario — to which Lo gave a 10 percent likelihood of materializing, compared with the base-case scenario’s 50 percent and the second scenario’s 40 percent — would be coronavirus infections continuing to rise next year, despite the development of a vaccine, and Taiwan’s economy growing 2.4 percent annually, he said.
The central bank would keep its benchmark rates unchanged next year in all three scenarios, and US-China trade tensions would stabilize, as it would not be US president-elect Joe Biden’s priority to have trade talks with China, he said.
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