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.
Shares of contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) came under pressure yesterday after a report that Apple Inc is looking to shift some orders from the Taiwanese company to Intel Corp. TSMC shares fell NT$55, or 2.4 percent, to close at NT$2,235 on the local main board, Taiwan Stock Exchange data showed. Despite the losses, TSMC is expected to continue to benefit from sound fundamentals, as it maintains a lead over its peers in high-end process development, analysts said. “The selling was a knee-jerk reaction to an Intel-Apple report over the weekend,” Mega International Investment Services Corp (兆豐國際投顧) analyst Alex Huang
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is expected to remain Apple Inc’s primary chip manufacturing partner despite reports that Apple could shift some orders to Intel Corp, industry experts said yesterday. The comments came after The Wall Street Journal reported on Friday that Apple and Intel had reached a preliminary agreement following more than a year of negotiations for Intel to manufacture some chips for Apple devices. Taiwan Institute of Economic Research (台灣經濟研究院) economist Arisa Liu (劉佩真) said TSMC’s advanced packaging technologies, including integrated fan-out and chip-on-wafer-on-substrate, remain critical to the performance of Apple’s A-series and M-series chips. She said Intel and Samsung
TRANSITION: With the closure, the company would reorganize its Taiwanese unit to a sales and service-focused model, Bridgestone said Bridgestone Corp yesterday announced it would cease manufacturing operations at its tire plant in Hsinchu County’s Hukou Township (湖口), affecting more than 500 workers. Bridgestone Taiwan Co (台灣普利司通) said in a statement that the decision was based on the Tokyo-based tire maker’s adjustments to its global operational strategy and long-term market development considerations. The Taiwanese unit would be reorganized as part of the closure, effective yesterday, and all related production activities would be concluded, the statement said. Under the plan, Bridgestone would continue to deepen its presence in the Taiwanese market, while transitioning to a sales and service-focused business model, it added. The Hsinchu
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has approved a capital budget of US$31.28 billion for production expansion to meet long-term development needs during the artificial intelligence (AI) boom. The company’s board meeting yesterday approved the capital appropriation plan for purposes such as the installation of advanced technology capacity and fab construction, the world’s largest contract chipmaker said in a statement. At an earnings conference last month, TSMC forecast that its capital expenditure for this year would be at the higher end of the US$52 billion to US$56 billion range it forecast in January in response to robust demand for 5G, AI and
RSS