Trade poses risks to GDP growth: ANZ - Taipei Times

GDP might grow at a slower 2.4 percent next year, as US-China trade tensions could evolve into a major disruptor of global electronic supply chains, posing downside risks to growth, Australia and New Zealand Banking Group (ANZ) said yesterday.

The trade issue is a key determinant of growth outlook, because the nation is an integral part of the global supply chain, which includes major economies such as the US and China, ANZ said.

About 48 percent of orders received by local manufacturers are produced in China, including Hong Kong, and the export outlook is sensitive to developments, ANZ said.

Although US President Donald Trump and Chinese President Xi Jinping (習近平) have agreed to delay new tariffs, uncertainty surrounding the trade outlook would extend into next year, it said.

ANZ economists forecast that GDP growth in the US and Europe would slip to 2.1 percent and 1.6 percent respectively next year, which would be unfavorable for Taiwan.

Economic data suggest a dissipation in export momentum. Export orders last month contracted 2.1 percent from a year earlier and the decline could widen this month, Ministry of Finance officials said.

Actual shipments last month fell 3.4 percent and might retreat further this month, as global sales of smartphones have been disappointing, officials said.

Another downside risk springs from a decline in commodity prices, ANZ said.

Metal and petrochemical products have been among the top performers this year, as they benefited from a recovery in prices earlier in the year, it said.

For the first 11 months, prices for basic metal products gained 10.4 percent, while mineral products soared 24.5 percent, it said.

However, many commodity prices have plummeted in recent weeks and exports of related products would come under downward pressure next year, ANZ said.

ANZ expects inflation to show a dismal 1.1 percent increase next year, while domestic consumption is expected to remain weak ahead of the presidential election in 2020.

Volatility in equity markets and political uncertainty in the aftermath of last month’s nine-in-one elections would also weigh on domestic demand, it said, adding that low inflation would continue to lend support for low interest rates.

“The central bank appears to be comfortable with the current monetary policy stance, with the US Federal Reserve to become less hawkish next year,” it said.

The US-China trade issue and a slowdown in global tech demand would weigh on the New Taiwan dollar until the second half of next year, when global supply chains should have adjusted to the tariffs, the bank said.

Taiwan’s large current-account surplus would continue to provide support for the currency, which might trade at 30.4 against the US dollar by the end of next year, ANZ said.

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