Cathay Financial Holding Co (國泰金控) has revised downward its forecast for local economic growth from 3.9 percent to 3.7 percent, as the Ukraine war has caused food and metal prices to rise, worsened inflation and dampened global demand, it told a news conference in Taipei yesterday.
It is the first time the financial conglomerate has lowered its forecast for this year — it predicted an annual GDP growth of 3.5 percent in September last year and raised the figure to 3.9 percent in December, Cathay Financial data showed.
“The Ukraine war is the main reason for our revision. Although Russia and Ukraine account for less than 2 percent of global GDP, they are key suppliers of wheat, metal and energy, and the war in Ukraine has driven up prices of oil, food and metals,” 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
“These price increases will worsen inflation in the US, which was already high before the outbreak of the war. Serious inflation might lead to lower consumption and even to economic recession,” Hsu said, adding that the US Federal Reserve cut its GDP growth estimate to only 2.8 percent.
There is a strong correlation between the US and Taiwanese economies, as the US is an important economic partner, Hsu said, adding that Cathay’s research has shown that a drop of 1 percentage point in US economic growth correlates to a dip of 0.5 percentage points in Taiwan’s economy.
Although exports and investment this year are expected to maintain their momentum, they are unlikely to show a robust rise year-on-year because of a high comparison base last year, Hsu said, adding that private consumption is likely to be the main driver of local economic growth this year.
“High inflation in Taiwan might curb private consumption, but we still estimate good annual growth” in consumption, Hsu said, adding that spending weakened during a local COVID-19 outbreak last year.
Whether the central bank is to raise the benchmark interest rate again in June depends on local inflation, Hsu said.
The consumer price index in the first two months of the year rose 2.6 percent annually, and “if its growth surpasses 3 percent from March to May, there is an 80 percent chance that the central bank will raise the rate again,” Hsu said.
The government has other tools for controlling inflation, such as freezing electricity or transportation costs, and all of the tools are likely to be tried before the central bank hikes rates again, Hsu said.
The central bank would not necessarily raise the rate multiple times, as Taiwan’s inflation rate is much lower than in the US, he added.
After several years flying high as Asia’s best Nvidia Corp proxy, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is increasingly vying with other artificial intelligence (AI) stocks for investor attention. Stock traders are chasing a wider array of beneficiaries as mainstream usage of AI creates demand for hardware beyond the most-advanced chips TSMC makes for Nvidia. Subthemes from the deepening memory crunch to advances in robotics are also luring bids. At the same time, investment caps on single stocks are pushing funds to diversify, while retail investors long familiar with TSMC through its US depositary receipts are being offered a broader set of
UNDER MICROSCOPE: Taiwan detained three people who allegedly conspired to buy servers in Taiwan and export them using fraudulent documentation, prosecutors said Nvidia Corp chief executive officer Jensen Huang (黃仁勳) on Saturday urged Super Micro Computer Inc to tighten up on compliance after Taiwan detained three people this week for allegedly making fraudulent declarations about artificial intelligence (AI) servers made by its US partner. The development marked the nation’s first crackdown on semiconductor smuggling, which grew after the US slapped restrictions on exports of high-end chips such as Nvidia AI accelerators to China. Nvidia is “rigorous” in explaining regulations to all of its partners, Huang told reporters after arriving in Taipei. “Ultimately Super Micro has to run their own company,” he said in response to
TECH RELIANCE: Growth is increasingly reflecting an unequal K-shaped distribution, where technology sectors outperform and other industries struggle, an expert said Standard Chartered Bank has significantly raised its forecast for Taiwan’s economic growth to 9.5 percent this year, up from 7.6 percent previously, citing surging artificial intelligence (AI) demand driving exports, semiconductor production and investment. The upgrade reflects a sustained AI supercycle that continues to fuel demand for advanced chips and technology infrastructure, which form the backbone of Taiwan’s exports, the bank said in a report this week. “We raise our 2026 growth forecast to reflect a much stronger-than-expected first-quarter GDP figure,” Standard Chartered senior economist for greater China and Asia Tommy Wu (胡東安) said in the report. Driven largely by a 35.3 percent
Two of Taiwan’s international carriers, Starlux Airlines Co (星宇航空) and EVA Airways Corp (長榮航空), have retained the five-star airline rating awarded by international airline review organization Skytrax. Starlux was awarded the distinction for a second consecutive year, while EVA Air received it for the 11th straight year, Skytrax said in statements released yesterday and on Thursday last week, respectively. The five-star rating is considered one of the airline industry's highest honors and is awarded following professional audits of airline product and frontline service standards, Skytrax said. The ratings are based on in-depth assessments using unified global quality standards rather than customer review scores
RSS