Taipei, June 19 (CNA) DBS Bank cut its forecast for Taiwan’s economic growth in 2012 to 2 percent from 2.9 percent on Tuesday, to reflect a slowing global economy and the lingering debt crisis in the eurozone.
In a quarterly market report, DBS Bank said Taiwan’s exports, which served as the backbone of the island’s economic growth, were faced with challenges as global demand was weakening.
Earlier this month, Australia and New Zealand Banking Group Ltd (ANZ) lowered its estimate for this year’s growth in Taiwan’s gross domestic product (GDP) to 3.10 percent from an earlier estimate of 3.97 percent, after factoring in the weakened global fundamentals due to the European debt crisis.
In May, the Taiwan government cut its 2012 GDP growth forecast to 3.03 percent from its earlier prediction of 3.38 percent, due to pessimism about the island’s exports.
Meanwhile, Standard Chartered Bank left its forecast of 2.7 percent for Taiwan’s 2012 economic growth unchanged.
DBS Bank said it was expecting Taiwan’s consumer price index (CPI) to rise 1.5 percent in the second half of this year and 1.4 percent for the entire 2012, adding that inflation would remain in check.
Further, it said that because of the slowing economy, the central bank was expected to leave its key interest rates unchanged in the upcoming quarterly policymaking meeting scheduled for Thursday, to ensure ample liquidity.
Since the end of June 2011, the central bank has kept its interest rates intact, with discount rate at 1.875 percent, the rate of accommodations with collateral at 2.25 percent, and the rate of accommodations without collateral at 4.125 percent.
DBS Bank said the central bank was likely to maintain the discount rate at 1.875 percent throughout the second half of this year.
Tony Phoo, an economist with Standard Chartered Bank, believed there was little room for the central bank to cut interest rates despite the economic slowdown, since the domestic market continues to be awash with idle funds.
Phoo said the central bank was expected to address the need to curb local property prices and leave its key interest rates unchanged in the Thursday policymaking meeting.
For its part, ANZ also expects the central bank not to make any change in its key interest rates Thursday. -By Kao Chao-fen and Frances Huang