Cathay Financial Holding Co (國泰金控) yesterday raised its GDP growth forecast for Taiwan to 6.1 percent for this year and 3.9 percent for next year, citing a recovery in private consumption and continued growth in exports.
In September, the firm forecast growth of 5.6 percent for this year and 3.5 percent for next year.
Although the uncertainty of the COVID-19 pandemic persists, domestic consumption has significantly recovered in the fourth quarter, alleviating most economists’ main concerns regarding the local economy this year, said National Central University economics professor Hsu Chih-chiang (徐之強), who heads a research team commissioned by Cathay Financial.
Photo: Allen Wu, Taipei Times
Retail sales rebounded to NT$373 billion (US$13.46 billion) in October and NT$375.4 billion last month, following five consecutive months of annual decline due to the implementation of a level 3 COVID-19 alert starting in May, Ministry of Economic Affairs data showed.
Despite power rationing in China and a slowing economy in the US, the nation’s exports in the fourth quarter continued to increase by a double-digit percentage thanks to robust demand for technology products amid a digitalization trend, Cathay Financial said.
Since June, exports have hit record highs, with total outbound shipments in the first 11 months of the year advancing 30 percent to US$405.7 billion from a year earlier, Ministry of Finance data showed.
“Next year, we expect domestic consumption to be the driver of economic growth. Exports are expected to keep their growth momentum, but are likely to grow at a slower pace due to this year’s high comparison base,” Hsu said.
Cathay Financial forecast that Taiwan’s economy would expand 3 percent in the first half of next year and 5 percent in the second half, he added.
Next year, the central bank is likely to raise interest rates, given that the US Federal Reserve plans to do so in June at the earliest and considering the rise in inflation, Hsu said.
“It has been 10 years since the last time that the central bank raised its rates, and according to the rule of thumb, it usually hikes rates at a slower pace than when it lowers rates,” he added.
The central bank is likely to raise rates multiple times by 12.5 basis points each time, unless inflation becomes more severe, he said.
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