Tue, Sep 16, 2025 page9

• Cathay lifts GDP forecast to 4.5 percent

  AI DEMAND: Demand proved far stronger than expected, offsetting the impact of tariffs and prompting an upward revision to GDP growth, Cathay’s research team said

  • By Crystal Hsu / Staff reporter
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  Cathay Financial Holding Co (國泰金控) yesterday sharply raised its forecast for Taiwan’s economic growth this year to 4.5 percent, up from a previous estimate of 2.8 percent, citing stronger-than-expected exports driven by front-loading activity and sustained demand for artificial intelligence (AI) components.

  “AI demand has proven far stronger than anticipated, offsetting the impact of tariffs and driving an upgrade in GDP growth,” said Hsu Chih-chiang (徐之強), an economics professor at National Central University who spoke on behalf of a research team commissioned by Cathay Financial.

  Exports have surged well beyond earlier projections, supported by resilient global financial conditions. Concerns over tariffs eased in July, while growing expectations of US Federal Reserve rate cuts have kept financial conditions accommodative, Hsu said.

  

  Cathay Financial Holding Co chief investment officer Sophia Cheng, third left, National Central University economics professor Hsu Chih-chiang, third right, and other research team members pose for a photograph at a news conference in Taipei yesterday.

  Photo: CNA

  Taiwan’s central bank is expected to leave its policy rate unchanged at its quarterly board meeting on Thursday, even as the Fed is widely anticipated to cut rates by 25 basis points and potentially follow with additional reductions later this year and into next year, he said.

  “Taiwan’s robust economy simply leaves no need or room for the central bank to cut interest rates,” Hsu said.

  Nonetheless, he said that the picture might shift next year as tariffs take a deeper toll on the job market.

  GDP growth could slow to 2 percent next year, with headwinds likely to weigh on most industries, affecting corporate earnings and employment, Hsu said.

  Private consumption has already shown little to no growth this year, while real-estate agencies have felt the impact of tighter mortgage rules that have depressed housing transactions, he said.

  The government’s planned distribution of NT$10,000 per person in cash handouts later this year might offer a temporary lift to consumer spending in the fourth quarter, but would not reverse the broader structural slowdown, Hsu said.

  Non-tech manufacturers and service providers are already reporting stalled business momentum, he added.

  Taiwan’s growth trajectory would depend on a combination of external and domestic factors, Hsu said.

  US tariffs might dampen global demand and weigh on Taiwan’s exports, while the Fed’s policy stance — particularly the timing and scale of rate cuts — would influence US growth and inflation, with spillover effects on Taiwan through trade and financial markets, he said.

  China, Taiwan’s second-largest trading partner, also adds uncertainty. The effectiveness of Beijing’s policy stimulus, and the recovery of consumer confidence and stability in China’s housing market would be an important factor in whether regional demand can hold up, Hsu said.

  Domestically, the central bank’s mortgage restrictions and warnings over rising housing loan rates are likely to undermine sentiment in the housing market, Hsu said.

  Even so, advances in AI and robotics could spur fresh investment and accelerate Taiwan’s industrial transformation, developments that could prove decisive in determining the nation’s ability to capture the next wave of growth opportunities, he said.
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