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.
LOPSIDED DEVELOPMENT: While AI firms are riding the wave as far it can take them, traditional industries and their workers are not floated by the same flood While Taiwan is benefiting from a global artificial intelligence (AI) boom, many traditional industries have seen little of the benefit, widening the country’s “K-shaped” economic divide, an economist said. A “K-shaped” economy is one in which some sectors expand rapidly while others struggle, head of the commerce development and strategy research division at the Commerce Development Research Institute Ju Haw (朱浩) said in an interview. In Taiwan’s case, high-tech and AI-related industries have continued to grow while traditional industries have come under increasing pressure, he said. AI development has created crowding-out effects, as large high-tech firms generating strong profits are better able
Artificial intelligence (AI) requires safeguards that go beyond self-regulation, Microsoft Corp cofounder Bill Gates said in an interview that aired on Sunday, calling for legislation to be passed in US Congress. “You need law enforcement and the politicians to get into the discussion about what safeguards and monitoring look like,” Gates said in a taped interview on NBC’s Meet the Press program. “And that has to be a required thing.” A sudden groundswell has risen in favor of federal intervention after OpenAI in July said that an autonomous AI agent went rogue during a security test and hacked into another company, subverting
Apple Inc is set to sell about 6 million units of the iPhone Duo this year, Counterpoint Research said, offering the first estimate for how the company’s inaugural foldable device would fare. The figure, more typical of the niche foldable segment than Apple’s usual smartphone sales, is contingent on how well the company ramps up production of the new hardware, Counterpoint senior analyst Ivan Lam (林科宇) said. Priced at US$1,999 and set for a release this month, the iPhone Duo sits atop the Apple lineup and carries industry wide hopes for stoking greater interest and sales of foldables. Market researcher IDC Corp
Taiwan ranked fifth worldwide in net financial assets per capita at the end of last year, averaging 164,470 euros (US$186,219), a report released this week by Germany-based Allianz Research said. Taiwan's ranking remained unchanged from the previous year, trailing only the US, Switzerland, Denmark and Singapore, Allianz’s Global Wealth Report said. In the report, Allianz assessed household assets and liabilities in nearly 60 countries, finding that global household wealth reached a record high last year, while the rise of artificial intelligence and market gains made asset ownership increasingly important in determining who benefits from wealth creation. Global financial assets reached a record 268.4
RSS