Cathay Financial Holding Co (國泰金控) yesterday raised its forecast for Taiwan’s GDP growth to 2.4 percent this year and 3.2 percent next year, saying that the economy at home is improving, as is the global situation, although more time is needed for the nation to reach pre-COVID-19 pandemic levels.
Cathay Financial’s previous projections were 1.7 percent for this year and 2.9 percent for next year.
Despite the expected improvement, Cathay Financial — the nation’s largest financial institution by market value — agreed with international research bodies that the global economy needs more time to recover to pre-pandemic levels, citing economic reports for this and next year.
Photo: Allen Wu, Taipei Times
“That view accounted for our relatively conservative forecast,” said National Central University professor of economics Hsu Chih-chiang (徐之強), who heads a research team commissioned by Cathay Financial.
The Directorate-General of Budget, Accounting and Statistics, the central bank and Academia Sinica have more optimistic projections for growth next year of 3.68 percent, 3.83 percent and 4.24 percent respectively, Hsu said.
Taiwanese firms would continue to benefit from strong demand for new technology applications and devices required to maintain a low-contact economy in the next six months, he said.
People around the world are being given COVID-19 vaccines, which might enable economic activity to return to normal, he said.
The situation is favorable for global trade flows, allowing exports and imports next year to expand 4.33 percent and 4.4 percent respectively, Hsu said.
Private consumption might increase 3.8 percent after floundering in negative territory this year, he said.
Travel restrictions have caused havoc for GDP, despite the government’s Triple Stimulus Voucher program and a boom in domestic tourism, he said, adding that international travel is expected to begin recovering slowly in the second half of next year.
Private investment is forecast to increase 2.5 percent next year, slower than the government’s projected 3.19 percent gain, he said, adding that demand for technology products would lose steam if things return to normal.
Major central banks would stand by loose monetary policies to support economic growth in the next two years and Taiwan would follow suit, although it has held firm so far, Hsu said.
Easing monetary policies would support financial assets, as seen in liquidity-driven rallies across global bourses, he said, adding that a recent sentiment survey showed risk appetite among local investors reached a 10-year high.
Still, the pandemic, deteriorating government debts and US-China trade tensions pose uncertainties to recovery, he said.
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