Cathay-Taida Industry-Academia Collaboration Team: Raises Taiwan, China's 2014 Economic Growth Rate to 3.29%

(Taiwan Business News) The Cathay-Taida Industry-Academia Collaboration Team said on the 17th that, on the basis of a strengthening "Europe", a recovering "US" and a stable "China", external demand growth momentum will still be the main driving force for Taiwan, China's economic growth in 2014. In addition, rising national economic confidence, an improving job market, recovering willingness to consume, rising optimism about the stock market, and persistently loose financial conditions all help boost the momentum of domestic demand growth. Based on the above, the team has raised Taiwan, China's 2014 economic growth rate to 3.29% (previously 2.98%), with a forecast range of 2.8%-3.6% (previously 2.5%-3.6%), and believes that it will not be difficult for this year's economic growth rate to reach "3", and that the target should be achievable with effort.

The Cathay-Taida Industry-Academia Collaboration Team said that, affected by the relative weakness of emerging markets, the IMF slightly lowered its 2014 global economic growth rate to 3.6% in April, just as the team had judged at its previous presentation, and emerging markets have not dealt a major shock to the global economy. On the basis of a strengthening "Europe", a recovering "US" and a stable "China", external demand will still be the main driving force for Taiwan, China's economic growth in 2014.

National economic confidence has turned more optimistic, the job market has improved, willingness to consume has recovered, and persistently loose financial conditions all help boost domestic demand, thereby driving economic growth. Based on the above, the team has raised Taiwan, China's 2014 economic growth rate to 3.29% (previously 2.98%), with a forecast range of 2.8%-3.6% (previously 2.5%-3.6%).

The Cathay-Taida Industry-Academia Collaboration Team pointed out that the economic climate in the second and third quarters is "clear" and the economy is stable; the business cycle indicators published by the National Development Council have shown a green light for 3 consecutive months, and both leading and coincident indicators have continued to rise. As the team expected previously, the economic climate in the second quarter can turn from "cloudy" in the first quarter to "clear", and it is judged that the third quarter will continue to remain "clear", representing continued economic stability. In addition, the probability of the economic climate being "clear" is above 50%, and the probability of "cloudy" is below 30%, indicating that the risk of a short-term economic recession is not great.

The Cathay-Taida Industry-Academia Collaboration Team said that financial conditions in the second half of the year are expected to remain "trending toward easing": the recent average daily stock market trading volume has been above 90 billion, the stock price index has also held firm above 9,000 points, and interest rates remain at a low level, all of which are the main reasons for financial conditions remaining loose.

At present, the 6-month moving average trend of the public's optimism about the stock market and risk appetite is still rising continuously, and the stock market is expected to maintain high-level fluctuations; although high inflation creates pressure on the central bank to raise interest rates, rates will not rebound sharply, while rising US Treasury yields leading to a stronger US dollar will make the Taiwan dollar slightly weaker afterward. In summary, therefore, financial conditions will turn toward easing and can still provide momentum for economic growth.

The Cathay-Taida Industry-Academia Collaboration Team pointed out that the key factors affecting economic growth in the second half of 2014 include: (1) the negative effect of high inflation on private consumption. (2) the speed and magnitude of central bank interest rate hikes, and the reaction of financial markets. (3) after the US stops QE, expectations of interest rate hikes emerge in the market. (4) whether the low inflation problem in the euro area can be effectively resolved. (5) the strength of policy support from China's mini-stimulus and targeted easing.