DBS Bank Ltd (星展銀行) last week lowered its forecast for Taiwan’s GDP growth this year to minus-1 percent, down from the 0.9 percent growth the bank predicted on March 23, as the COVID-19 pandemic is projected to deal a serious blow to the nation’s exports.
“A decline in exports as a result of the lockdowns and shutdowns in Europe, the US and Southeast Asia is the biggest challenge facing the Taiwanese economy for the coming quarters,” DBS economist Ma Tieying (馬鐵英) said in a report on Wednesday.
“Taiwan’s exports, industrial production and purchasing managers’ index data held up well as of February and last month, but a sharp contraction could be expected ahead in the second and third quarters, when global recession, job losses and income declines start to emerge,” Ma said.
Singapore-based DBS’ forecast was more bearish than the 0.2 percent growth Moody’s Investors Service predicted on Monday last week.
The central bank on March 19 revised downward its GDP forecast this year to 1.92 percent, but some research institutes have placed their estimates at about 1 percent.
The latest government data released last week showed that Taiwan’s exports last month declined 0.6 percent from a year earlier to US$28.27 billion, while its combined exports in the first quarter expanded 3.7 percent year-on-year to US$78.7 billion.
The Taiwanese economy would fare better than during the global financial crisis of 2008 to 2009, DBS said, adding that electronics exports should remain relatively resilient, thanks to the rise in telecommuting and the resultant demand for laptops, tablets and other electronic devices.
“We also expect the economic losses in Taiwan to be smaller than that in Singapore, Hong Kong and South Korea,” Ma said, adding that the spread of COVID-19 in Taiwan is relatively under control in light of the government’s early response and its fast expansion of mask production capacity.
In addition, Taiwan’s domestic transport, retail and recreation, and work activities also remained at about 75 percent, 90 percent and 100 percent respectively of normal levels as of the end of last month, making it one of the highest in Asia, she said, citing Google’s COVID-19 Community Mobility Report.
DBS has also trimmed its GDP growth forecast for South Korea from 0.8 percent to minus-1.1 percent for the same reasons, meaning that South Korea’s economic performance this year would likely be worse than in the global financial crisis.
Singapore’s GDP growth estimate has been further lowered to minus-2.8 percent and Hong Kong’s growth has been downgraded to minus-4 percent this year, which would be deeper than the Asia financial crisis and the global financial crisis, DBS said.
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