Cathay Financial raises Taiwan’s 2018 GDP growth forecast

Taipei, Cathay Financial Holding Co., one of the largest financial holding firms in Taiwan, said Monday that it has raised its forecast for Taiwan's gross domestic product (GDP) growth for 2018, citing strong global demand.

Joining the growing list of forecasting institutions to upgrade their predictions, Cathay Financial said that Taiwan's GDP is expected to grow 2.3 percent in 2018, up 0.3 percentage points from an earlier estimate it made in December.

In late February, the Directorate General of Budget, Accounting and Statistics (DGBAS) raised its forecast for Taiwan's 2018 GDP growth to 2.42 percent from 2.29 percent.

Cathay Financial said the upgrade of GDP growth reflected the booming U.S. and European economies, which are expected to boost global demand and benefit export-oriented economies.

While Cathay Financial's GDP growth forecast was lower than that of the DGBAS, the financial firm estimated that Taiwan's merchandise and service exports will hit 2.89 percent, beating the government's expectation of 1.98 percent.

Cathay Financial said Taiwan's capital formation is expected to grow 3.36 percent and that private consumption is forecast to grow 2.01 percent in 2018.

National Central University economist Hsu Chih-chiang (???), who led the Cathay Financial research team that made the forecast, said that sound economic fundamentals and growing inflation are expected to prompt the local central bank to raise its key interest rates from the second quarter of this year at the earliest.

The central bank left interest rates unchanged for the sixth consecutive quarter in the fourth quarter of last year, with a discount rate of 1.375 percent.

Hsu said the central bank is expected to raise interest rates by 0.125 percentage points in a policymaking meeting scheduled for the end of June, which is unlikely to have an adverse impact on economic growth.

While Hsu expressed optimism toward the local economy, he warned of a possible trade war amid rising protectionism in Washington, which could affect the pace of the global economic recovery.

Hsu said that if the U.S. Federal Reserve speeds up its pace of carrying out a rate hike cycle this year, the global economy is expected to feel the pinch.

Source: Focus Taiwan News Channel