Cathay Financial Holding Co (國泰金控) yesterday lowered its forecast for the nation’s GDP growth this year from 1.8 percent to 1.3 percent — its second downward revision this year — due to weak exports, slowing capital equipment imports and sagging private investment.
Despite the strength of domestic consumption, monetary tightening by central banks and economic headwinds in China have reduced demand worldwide, unfavorable to Taiwan’s export-reliant economy, National Central University economics professor Hsu Chih-chiang (徐之強) said.
Hsu heads a research team commissioned by Cathay Financial.
Photo: Wu Hsin-tien, Taipei Times
The probability of GDP growth this year falling to between 0.9 percent and 1.9 percent is about 80 percent, Hsu said, citing the research team’s estimate.
The central bank last week cut its forecast for the nation’s GDP growth this year from 1.72 percent to 1.46 percent, while the Directorate-General of Budget, Accounting and Statistics last month trimmed its forecast from 2.04 percent to 1.61 percent.
Hsu said the economy still has a chance of coming out of the woods in the fourth quarter, driven by an improvement in the manufacturing sector’s inventories, increased demand for consumer electronics during the peak season and demand for artificial intelligence-related goods.
Next year, the economy is forecast to expand by 2.9 percent, with an 80 percent probability that GDP growth would reach between 2 percent and 3.9 percent in the year, he said.
The central bank is not expected to raise its policy rates this year after pausing again at its quarterly board meeting last week, as service inflation is subsiding in Taiwan, and an end is in sight for the US Federal Reserve’s rate hike cycle, the research team said.
As Taiwan’s full-year economic growth is estimated at 1.3 percent this year and lower than that of the US and China, such situations are rare and thus a continued rate pause by the central bank is warranted, even if the consumer price index rises more than 2 percent this year, Wu said.
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