Fubon Financial raises Taiwan’s 2018 GDP growth forecast to 2.6%

Taipei, Fubon Financial Holding Co., one of the leading financial holding firms in Taiwan, has raised its forecast of the country's gross domestic product (GDP) growth for this year, to 2.6 percent on the back of strong export performance.

Fubon Financial said Taiwan's economy enjoyed a strong first half of this year due to solid growth in outbound sales, so it has upgraded its forecast of the country's GDP growth for the year to 2.5-2.6 percent from an earlier estimate of 2.2 percent made at the end of 2017.

The latest Fubon Financial forecast came close to the government forecast. The Directorate General of Budget, Accounting and Statistics raised its prediction in late May to 2.6 percent, up 0.18 percentage points from an earlier forecast, citing the better-than-expected first quarter.

Lo Wei (??), chief economist at Fubon Financial, said the Taiwan dollar is expected to move between NT$30 and NT$31 against the U.S. dollar in the second half of this year, compared with an average of around NT$29 in the first half.

Lo said a weaker Taiwan dollar is expected to raise Taiwan's global competitive edge and eventually boost Taiwanese firms' profitability in the second half of the year at a time of the rate hike cycle by the U.S. Federal Reserve to maintain the strength of the greenback in the third quarter.

Lo sided with Taiwan central bank's latest decision, which left its key interest rates unchanged in the quarterly policymaking meeting held in June for the eighth consecutive quarter, with the discount rate at 1.375 percent.

Even if the central bank starts to hike interest rates and if it raises rates twice this year by 0.125 percent each time, such small rate adjustments are expected to have a limited impact on the economy and fund flows, the economist said.

While Fubon Financial has become more upbeat about Taiwan's GDP growth for 2018, Lo called for caution regarding negative factors, such as a global trade war, which could affect the world's economy in the second half of this year.

As part of the escalating trade disputes between the U.S. and other countries, Washington started to impose tariffs on US$34 billion worth of Chinese goods on Friday and an additional US$16 billion worth of Chinese imports to the U.S. could face tariffs further down the line.

China responded immediately by imposing retaliatory tariffs on US$34 billion worth of imports from the U.S., and tariffs on an additional US$16 billion worth of American goods are pending.

U.S. President Donald Trump has said Washington is considering new tariffs targeting an additional US$200 billion worth of Chinese goods, which could escalate trade tensions between the world's two largest economies.

Lo advised investors to pay close attention to how the U.S.-China trade friction will evolve as escalating trade disputes could prompt foreign investors to move their funds out of the region and park them in U.S. dollars-denominated assets as a safe haven.

Source: Focus Taiwan News Channel