S&P Global Ratings has raised Taiwan’s GDP growth forecast from 1 percent to 1.64 percent for this year, while trimming the pace from 3 percent to 2.9 percent for next year, amid the benefits of a stay-at-home economy and optimism that COVID-19 vaccines would reduce downside risks.
The rollout of vaccination programs against the COVID-19 outbreak would support a stable outlook for Taiwan’s economy this year and next year, despite global demand being ravaged by the pandemic, corporate credit analyst Raymond Hsu (許智清) at Taiwan Ratings Corp (中華信評), the local arm of S&P, told a news conference in Taipei yesterday.
“Growth risk is now neutral as multiple vaccine successes increase recovery upside,” Hsu said.
Photo: Clare Cheng, Taipei Times
Taiwan has emerged from the pandemic unscathed, thanks to its effective handling of the outbreak, and an unexpected boom in demand for remote working and schooling devices, Hsu said.
Strong electronics exports and low material costs have bolstered the outlook for local firms, with the earnings of top corporations beating the agency’s expectations, he said.
Downside risks, while retreating, remain, while ongoing virus containment measures and growing debt worldwide could derail the post-pandemic recovery, Taiwan Ratings said.
High inventories and receding demand from the low-contact economy are substantial risks, particularly for the technology sector, Hsu said.
Other risks include oversupply from aggressive investments in China, technology shifts and rising production costs for capacity diversification, he said.
COVID-19 pains could persist for chemical companies, with their business outlook staying negative, Hsu said, adding that a recovery could be pushed back to 2022 and beyond for oil refining despite improving oil prices.
Massive capacity expansions in China are unfavorable to recovery and Taiwan’s exclusion from regional trade bodies would add long-term pressure on chemical companies, with the bulk of their capacity in Taiwan, he said.
Domestic auto sales are stable, helped by domestic demand, while the global auto market looks much weaker, he said.
The pandemic would continue to hamper air travel and container carriers have not yet come out of related risks, Hsu said.
The banking sector might see moderate loan growth of 4.5 percent next year, supported by a projected 3 percent GDP growth, Taiwan Ratings financial analyst Andy Chang (張書評) said.
However, low interest rates and market volatility could continue to squeeze the sector’s profitability, with its pretax return on assets expected to drop to a decade-low of 0.4 percent, from 0.49 percent this year, Chang said.
Bad debts would rise next year after relief and subsidy programs expire, he said.
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