Taiwan unlikely to hit 1% growth in 2016: Cathay Financial

Taiwan’s gross domestic product growth in 2016 will likely remain below 1 percent, according to a forecast made Tuesday by Cathay Financial Holding Co. (???), one of Taiwan’s leading financial services providers.

In its latest GDP growth forecast, Cathay Financial estimated Taiwan’s economic growth for the year at 0.8 percent, unchanged from its previous forecast in June.

That projection was less optimistic than the most recent estimate made by the government.

In mid-August, the Directorate General of Budget, Accounting and Statistics raised its forecast for Taiwan’s economic growth to 1.22 percent in 2016, an increase of 0.16 percentage points from its previous estimate due to improving exports and private consumption.

The country’s outbound sales in August rose 1 percent from a year earlier, the second consecutive month exports recorded a year-on-year increase.

But in the first eight months of this year, Taiwan’s exports were still down 6.6 percent from a year earlier at US$180.1 billion.

Cathay Financial said the rebound in exports over the past two months appeared limited, indicating that exports for the year as a whole are not likely to stage a meaningful recovery as global demand remains sluggish.

In its last forecast in June, Cathay Financial expected Taiwan’s merchandise and services exports to grow only 1.37 percent and merchandise and service imports to grow 1.98 percent year-on-year in 2016.

Hsu Chih-chiang (???), an economist with National Central University and a member of Cathay Financial’s economic research team, cautioned that a change in monetary policy could also affect the economy in the final quarter of the year.

He said that if the U.S. Federal Reserve surprises the market by raising its key interest rates at a policymaking meeting Sept. 20 and 21, Taiwan’s central bank could halt its cycle of rate cuts later in the month.

The central bank has lowered rates 0.125 percentage points at a time for four consecutive quarters starting in September 2015, hoping to give the domestic economy some momentum, and it will hold its next quarterly policymaking meeting on Sept. 29 to determine its next move.

Hsu said Taiwan’s economy will improve in 2017, with Cathay Financial forecasting 1.2 percent growth for the year, but ties with China, labor issues and a planned pension reform at home could emerge as factors that affect the domestic economy during the year.

Abroad, Britain’s decision to leave the European Union, the United States presidential election and the Fed’s monetary policy are also expected to have an impact on Taiwan’s economy next year, Hsu said.

According to Cathay Financial, Taiwan’s exports are expected to grow 2.21 percent in 2017.

Source: Focus Taiwan News Channel