Cathay Financial Holding Co (國泰金控) yesterday downgraded its GDP growth forecast for Taiwan for this year to 3.0 percent, from its previous estimate of 3.2 percent, and lowered its forecast to 2.3 percent for next year, down from 2.7 percent, citing slowing export and investment growth.
Other factors that could also weigh on the nation’s growth outlook include Russia’s invasion of Ukraine, China’s COVID-19 situation and inflation in the US and Europe, Cathay Financial Holding said.
Since the global economy is expected to slow next year, demand for manufactured goods from Taiwan might weaken, which would add to the pressure on electronics manufacturers facing inventory congestion and dampen exports momentum, said National Central University economics professor Hsu Chih-chiang (徐之強), who heads a research team commissioned by Cathay Financial Holding.
Photo: CNA
As companies become more conservative about exports and economic growth, they might refrain from expanding or making large-scale investments next year to avoid affecting the scale of private investment, Hsu said.
On a positive note, private consumption might contribute to the economy next year due to increased purchasing and relaxed border controls, he said.
In addition, growth momentum in the second half of next year might be stronger than in the first half, as firms are likely to have depleted their inventories by then, Hsu said.
Cathay Financial Holding’s 2.3 percent GDP growth forecast is lower than the 2.53 percent estimate by the central bank and the 2.75 percent that the Directorate-General of Budget, Accounting and Statistics predicted.
Inflation in Taiwan is expected to peak at about 2.0 percent at the end of first quarter next year and the central bank could stop its rate hikes in the first half of the year, Hsu said.
There is a slim chance that the central bank would lower its policy rates next year, he said.
The policy rates are still at a comparatively low level given the central bank’s mild pace of hikes this year, he added.
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