, Taiwan

Taiwan's 3Q GDP forecast slashed to 1.74%

2014 forecast also cut to 2.59%.

According to DBS, the final estimate of 3Q GDP was released last Friday, which was revised slightly to 1.7% YoY (vs. 1.6% in the preliminary estimate). With growth averaging only 1.9% in the first three quarters this year, the Directorate-General of Budget, Accounting and Statistics (DGBAS) cut the full-year GDP estimate to 1.74% from 2.31% previously.

Here's more:

The surprise was that the GDP forecast for 2014 was also lowered to 2.59% from 3.37%, far below the long-term growth trend of 4%. This was despite the positive signs of recovery seen in the last few months.

Both export and consumption demand have started to pick up, as evidenced by the rebound in export orders, retail sales and consumer confidence in Sep-Oct.

The downward revisions for the 2014 growth forecast mainly came from exports. It is worth noting that the official assumptions about global growth next year have remained basically unchanged (3.3% vs. 3.4% previously).

Instead, the downgrade of export forecast was largely attributed to structural problems, including 1) growing competition in the global smartphone and tablet markets, 2) persistent weakness in the traditional PC and notebook markets, 3) China’s supply chain maturity and cross-strait competition in the manufacturing industry.

Meanwhile, in line with the growth forecast downgrade, the DGBAS also trimmed the inflation estimates for 2013-2014 to 0.94% and 1.21% respectively (vs. 1.07% and 1.39%). The GDP and inflation forecasts produced by the DGBAS are often cited by the central bank in setting monetary policy.

Its conservative view about the 2014 outlook augments the chances that the central bank will maintain monetary policy accommodative in the most part of 2014. We stick to our forecast that the central bank will begin to normalize interest rates only from 4Q14.

Still, the mounting concerns about export competitiveness don’t necessarily mean the central bank will adopt a weak TWD policy next year.

Currency weakness can benefit exporters via boosting their profits. But there is no guarantee that exporters will spend profits on technology advancement and innovation, which are essential for enhancing the core competitiveness.

Join Singapore Business Review community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!