Taiwan Ratings Corp. forecasts Taiwan’s economy will expand by 2.8 percent in 2022 and also expects the central bank to raise interest rates by 0.25 percentage points.
Taiwan Ratings, a subsidiary of internationally renowned credit rating agency S&P Global Ratings, delivered its forecasts at a “2022 Taiwan Credit Outlook” Webcast webinar event on Thursday.
It also assigned a stable credit outlook for Taiwan this year citing robust foreign demand and increases in domestic consumption.
Strong export demand, increasing investment and growing private consumption last year are factors that reinforce the company’s forecast for Taiwan’s economic growth this year, said Joe Lin (林顯勍), director of the Structured Finance & Fixed-Income Funds Ratings department at Taiwan Ratings.
Due to a high basis of comparison last year amid a robust economic performance, Taiwan’s gross domestic product (GDP) is forecast to grow 2.8 percent this year and 2.6 percent next year, Lin added.
Meanwhile, inflationary pressure is expected to gradually fall to 1.5 percent this year and 1 percent next year, according to Lin.
The ratings company also expects Taiwan’s central bank to raise interest rates by 0.25 percentage points this year in line with anticipated tighter monetary policies adopted by major countries to control inflation, he said.
Taiwan’s banking and life insurance industries are likely to benefit from the expected slight increase in interest rates, according to Andy Chang (張書評), a chartered financial analyst and senior director in the Financial Services Ratings department at the company.
The company also indicated multiple risks facing Taiwan enterprises over the next few quarters, including rising inflationary pressure amid growing global demand and supply bottlenecks that have increased operating costs, including higher prices for raw materials and energy.
Meanwhile, pressure on central banks to tighten monetary policies could lift interest rates, hit capital flows, and cause greater volatility in exchange rates, it said.
In addition, COVID-19 outbreaks still pose a threat to global economic recovery and could hurt Taiwan’s export-reliant economy, it noted.
Government environmental policies also run the risk of raising operating costs, while adverse weather events remain a risk to industries.
In addition, the operations of banks and companies remain vulnerable to technological disruptions caused by cyber attacks, the company pointed out.
Source: Focus Taiwan News Channel