Taiwan 2017 GDP Growth May Top 2%

Taiwan’s gross domestic product for 2017 is expected to grow more than 2% on the back of a global economic recovery, but may slow down in the third quarter of the year, according to Cathay Financial Holding Co.

Cathay Financial, one of the leading financial holding firms in Taiwan, said in a research paper that it was retaining its forecast of 2.1% economic growth in 2017, CNA reported.

Several other financial institutions and economic think tanks have also forecast that Taiwan’s GDP growth will top 2% in 2017, compared with a 1.52% increase in 2016. The government, meanwhile, has upgraded its 2017 GDP growth forecast to 2.05% from 1.92%.

In its report, Cathay Financial revised its projection for Taiwan’s 2017 private consumption growth from 1.63% to 1.79%, and for capital formation from 1.65% to 2.21% growth.

It also upgraded its growth forecast for Taiwan’s merchandise and service exports for 2017, from 3.82% to 3.89%, and for merchandise and service imports from 3.05% to 3.62%.

The higher import growth forecast means a drop in the trade surplus, which will compromise the effects of higher private consumption and capital formation, Cathay Financial said, explaining why it had retained its 2.1% economic growth forecast for 2017.

However, it said that the economic growth momentum could fade to some extent in the third quarter, partly on a relatively high comparison base over the same period of last year.

Furthermore, Cathay Financial said, some negative external leads, such as a plan by the US Federal Reserve to scale back its holdings in bonds and other assets, could affect Taiwan’s economic growth rate in the third quarter.

In another report, Cathay Financial pointed to weaker sentiment toward the local economy. The June optimism indexes toward the current economy and the conditions over the next six months dropped slightly to -8.6 and -12.9, respectively, the report showed. A negative score means pessimism outweighed optimism in the category.

The silver lining was higher shipments in the electronics sector amid growing global demand, which may lend some support in the third quarter, Cathay Financial said. It forecast that the sequential GDP growth for the third quarter would slow to 0.28% from 0.36% in the second quarter and 0.9% in the first quarter.