Cathay Financial Holding Co (國泰金控) yesterday raised its forecast for GDP growth this year from 3.6 percent to 3.7 percent due to stronger-than-expected exports, but added it predicts a slowdown in consumer spending and private investment.
The nation’s largest financial conglomerate has turned cautious after imports of capital equipment squeezed 0.4 percent in the first eight months of the year, while economic data in the US, Europe and China displayed signs of weakness.
“We are less optimistic than the Directorate-General of Budget, Accounting and Statistics on grounds that uncertainty looms ahead,” National Central University academic Hsu Chih-chiang (徐之強) said on behalf of a Cathay Financial research panel at a news conference in Taipei.
Photo: CNA
Business confidence softened in major economies and the global manufacturing purchasing managers’ index (PMI) last month printed 48.9, staying in the contraction zone for five consecutive months, Hsu said.
Still, the largest uncertainty is the outcome of the upcoming US presidential election, which could affect Taiwan’s export-oriented economy, he said.
The US is gaining importance as Taiwan’s trade partner, accounting for 24.5 percent of overall exports as of last month, thanks to robust demand for electronics used in cloud data centers and artificial intelligence applications.
Former US president and Republican presidential candidate Donald Trump has accused Taiwan of stealing semiconductor-related jobs and vowed to raise tariffs on all imported goods should he win.
Hsu said the US Federal Reserve is bound to start cutting interest rates from this month to support the job market.
Domestically, imports of semiconductor equipment shrank 20.1 percent in the first eight months, as firms maintained a cautious approach in dealing with capital expenditure.
Hsu pointed out the central bank’s real-estate loan restrictions and said that private-sector credit has grown to an unprecedented 166 percent of GDP, warranting risk control measures.
Real-estate lending is approaching a record high as people take advantage of favorable lending terms, but might be hit by cash strains when the housing market takes a downturn, Hsu said.
That is what happened in the US when the subprime crisis struck and foreclosures surged in 2008, he said, adding that the central bank’s real-estate loan restrictions are aimed at averting such a scenario in Taiwan.
The central bank, while frowning on rising mortgages, would likely keep interest rates unchanged at its quarterly board meeting next week, given that core consumer price index remained its 2 percent target for five straight months, he said.
The central bank’s selective credit controls would not affect Taiwan’s economic growth since they are aimed at real-estate loans and leave other sectors intact, he said.
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