GROWING UNCERTAINTY:Concerns about electricity supply, oil prices, forex and geopolitical risks make it unlikely that firms would spend capital in the second half.
Cathay Financial Holding Co yesterday kept its forecast for the nation’s GDP growth this year unchanged at 2.3 percent, as exports are strong, but private investment disappoints.
The projection was in opposition with the views of most other domestic and foreign research institutes that have raised their growth forecast to reflect better-than-expected external demand.
“We are less upbeat about private investment, a component that proved a drag on GDP growth in the first quarter and has yet to show concrete improvement,” National Central University professor of economics Hsu Chih-chiang said on behalf of the research team.
Cathay Financial, the nation’s largest financial services provider by assets, expects capital formation to grow 3.55 percent this year, slower than the 5.01 percent pickup the Directorate-General of Budget, Accounting and Statistics predicted last month.
Private consumption might advance only 2.11 percent, compared with the agency’s forecast of 2.53 percent, Hsu said.
Firms, especially semiconductor makers, would continue to refrain from capital spending in the second half of the year, as uncertainty builds, Hsu said.
Concerns over electricity supply, oil prices, geopolitical risks, foreign-exchange rates and a brewing trade war between the US and China have prompted companies to take a cautious approach, Hsu said, adding that local firms in the supply chain of global technology giants could take a hit if protectionism slows global trade.
“The world can better assimilate the impact of extra tariffs on Chinese goods when they take effect next month,” he said.
An increase in oil prices and rate hikes by the US Federal Reserve have pushed up the US dollar and lent support to imported inflation and volatility across global bourses, Hsu said.
The tidings could pave the way for an economic downturn, which has seen an expanding economy for almost three consecutive years and might start to show signs of a slowdown or recession next year, if the past is a reliable guide, Hsu said.
The widening yield spread between the New Taiwan dollar and the US dollar is adding pressure on the central bank to end its accommodative monetary policy, he said.
The central bank is scheduled to review its policy rate in a quarterly board meeting today, after which the bank’s news conference is to be live-streamed for the first time.
Central bank Governor Yang Chin-long earlier told lawmakers that the nation’s economic state is about the same as it was in March, when the bank left its rediscount rate intact at 1.375 percent for the seventh consecutive quarter. |
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