Several major think tanks in Taiwan are expected to revise down their forecast for annual GDP growth this week, following Academia Sinica’s cut of its growth forecast for this year to 1.94 percent on Wednesday last week.
The weaker-than-expected economic momentum in the second quarter, caused by continuous global economic uncertainties, would be the major factor dragging down these institutes’ latest forecast, economists said.
“It is difficult for the nation’s economy to grow more than 3 percent this year,” director of the Chung-Hua Institution for Economic Research’s (CIER, 中華經濟研究院) center for economic forecasting Liu Meng-chun (劉孟俊) said by telephone.
Liu cited weak overseas and domestic demand as exports fell 4.7 percent from a year ago in the first six months of the year, with private consumption slower in the same period due to the government’s decision to raise energy prices.
Liu’s views confirmed that the CIER — which is scheduled to update its full-year economic growth forecast today — will cut the figure from the 3.55 percent growth it estimated in April.
The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院), which is set to release its latest growth forecast tomorrow, may also follow the trend, as the think tank estimated in April that economic expansion would reach 3.48 percent this year.
“Taiwan’s economic growth in the second quarter may be lower than that in the first quarter as a result of the impact of slowing domestic demand,” director of TIER’s macroeconomic forecasting center Gordon Sun (孫明德) said.
Many economists had previously thought Taiwan’s economy would bottom out in the first quarter, but it turned out that GDP in the second quarter may show a contraction because of the deteriorating domestic demand, Sun said.
Renewed worries about the nation’s economic prospects have placed speculation and discussion about the central bank possibly cutting interest rates back on the table.
The central bank on June 21 decided to keep its key interest rates unchanged for the fourth consecutive quarter and left its discount rate at 1.875 percent. The bank is expected to review its monetary policy adjustment at a board meeting in late September.
“Taiwan’s policy rate outlook is less than clear at this juncture,” Grace Ng (吳向紅), a Hong Kong-based economist at JPMorgan Chase Bank, said in a report issued on Wednesday last week.
Three months ago, there was a lot of discussion about the need for the central bank to raise policy rates, given the impact electricity and fuel price hikes had on inflation and on driving up uncertainty over the policy rate outlook, Ng said.
JPMorgan said it now views Taiwan’s near-term policy rate outlook as a close call.
“[Only] in the event that the external environment worsens further, will the probability of moderate rate cuts by the central bank rise in the coming months,” Ng said.
On the exchange rate front, it seems that policymakers have been keen to maintain a competitive currency through the economic cycles in support of the export sector, she added.
Cheng Cheng-mount (鄭貞茂), chief economist at Citigroup in Taipei, shared Ng’s views.
“The central bank still has many other tools and open-market operations, such as cutting the overnight interbank call-loan rate, to deal with the current economic situation in Taiwan,” Cheng said by telephone.
Cheng said that he sees no need for the central bank to cut the nation’s policy rates further in the second half of this year given the current low level of rates.
Nonetheless, the central bank has been gradually driving down the overnight interbank call-loan rate since last week, with the rate falling 0.014 percentage points to 0.391 percent on Friday last week, marking the lowest level in nearly 11 months. In the past seven trading sessions, the rate has declined by 0.118 percentage points.
A lower overnight interbank call-loan rate will drag down short-term financing costs for banks, which may further lower domestic firms’ financing costs and raise the market’s liquidity.
Australia and New Zealand Banking Group Ltd said in a report on Friday that the central bank will continue to lower the interbank overnight rates in a bid to reduce banks’ borrowing costs.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) last week recorded an increase in the number of shareholders to the highest in almost eight months, despite its share price falling 3.38 percent from the previous week, Taiwan Stock Exchange data released on Saturday showed. As of Friday, TSMC had 1.88 million shareholders, the most since the week of April 25 and an increase of 31,870 from the previous week, the data showed. The number of shareholders jumped despite a drop of NT$50 (US$1.59), or 3.38 percent, in TSMC’s share price from a week earlier to NT$1,430, as investors took profits from their earlier gains
In a high-security Shenzhen laboratory, Chinese scientists have built what Washington has spent years trying to prevent: a prototype of a machine capable of producing the cutting-edge semiconductor chips that power artificial intelligence (AI), smartphones and weapons central to Western military dominance, Reuters has learned. Completed early this year and undergoing testing, the prototype fills nearly an entire factory floor. It was built by a team of former engineers from Dutch semiconductor giant ASML who reverse-engineered the company’s extreme ultraviolet lithography (EUV) machines, according to two people with knowledge of the project. EUV machines sit at the heart of a technological Cold
TAIWAN VALUE CHAIN: Foxtron is to fully own Luxgen following the transaction and it plans to launch a new electric model, the Foxtron Bria, in Taiwan next year Yulon Motor Co (裕隆汽車) yesterday said that its board of directors approved the disposal of its electric vehicle (EV) unit, Luxgen Motor Co (納智捷汽車), to Foxtron Vehicle Technologies Co (鴻華先進) for NT$787.6 million (US$24.98 million). Foxtron, a half-half joint venture between Yulon affiliate Hua-Chuang Automobile Information Technical Center Co (華創車電) and Hon Hai Precision Industry Co (鴻海精密), expects to wrap up the deal in the first quarter of next year. Foxtron would fully own Luxgen following the transaction, including five car distributing companies, outlets and all employees. The deal is subject to the approval of the Fair Trade Commission, Foxtron said. “Foxtron will be
INFLATION CONSIDERATION: The BOJ governor said that it would ‘keep making appropriate decisions’ and would adjust depending on the economy and prices The Bank of Japan (BOJ) yesterday raised its benchmark interest rate to the highest in 30 years and said more increases are in the pipeline if conditions allow, in a sign of growing conviction that it can attain the stable inflation target it has pursued for more than a decade. Bank of Japan Governor Kazuo Ueda’s policy board increased the rate by 0.2 percentage points to 0.75 percent, in a unanimous decision, the bank said in a statement. The central bank cited the rising likelihood of its economic outlook being realized. The rate change was expected by all 50 economists surveyed by Bloomberg. The
RSS