Cathay Financial Holding Co (國泰金控) yesterday lowered its forecast for the nation’s GDP growth for a second time this year to 1.7 percent, from the 1.8 percent it predicted in June, due to weaker-than-expected economic performance in the first half of the year.
“The local economy grew slower than our expectations at 1 percent in the first six months, with an annual gain of 0.78 percent, which could be attributed to worse-than-expected private consumption,” said Hsu Chih-chiang (徐之強), an economics professor at National Central University who heads a research team commissioned by Cathay Financial.
Nevertheless, Cathay Financial’s latest forecast is still more optimistic than the Directorate-General of Budget, Accounting and Statistics’ (DGBAS) prediction of 1.56 percent growth and the central bank’s forecast of a 1.6 percent expansion, as the company is more upbeat about exports and private consumption, Hsu said.
Photo: Allen Wu, Taipei Times
“We do not think exports will be as sluggish as the government has forecast, as local manufactures are smart enough to ship their goods in advance of any ban that might result from US-China trade tensions,” he said.
For example, the nation’s exports last month hit a record US$31.17 billion, as some suppliers of Huawei Technologies Co (華為) shipped their products before Washington’s sanctions on the Chinese company took effect on Tuesday last week, he added.
“Exports likely hit US$28 billion this month, which would raise the third quarter’s total exports to US$88 billion, beyond the government’s prediction of US$84 billion,” Hsu said.
In the second half of this year, private consumption is expected to stage a rally strong enough to offset a 3.26 percent decline in the first half, which would result in a 0.72 percent dip for the whole year, milder than the DGBAS’ prediction of 1.44 percent, he said.
Cathay Financial expects the economy to recover next year with annual growth of 2.9 percent, which would be higher than the nation’s average GDP growth of 2.7 percent over the past 10 years, Hsu said.
That is more conservative than the DGBAS’ prediction of 3.92 percent growth, as Cathay Financial thinks that US-China trade tensions and Washington’s new sanctions on Chinese firms are likely to disrupt global supply chains, which local companies could fall prey to, he added.
Taiwanese companies would have to find new customers if their relationship with Chinese companies change, he said, adding that firms might also need to adopt new production models due to changing global supply chains.
“While the government has predicted a V-shaped recovery in the economy, Cathay Financial tends to expect a swoosh-shaped rebound, which means that it would take a long while for the economy to get back to the pre-pandemic situation due to uncertainty,” Hsu said.
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