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Gross domestic product growth to rise up to 4.23 percent: researchers

Cathay Financial Holdings (國泰金控) yesterday announced its economic forecast stating that it expects Taiwan's 2013 gross domestic product (GDP) to reach 4.23 percent.

The researches said the findings, the result of a collaborative partnership with scholars, suggest that as economic growth accelerates, as much as 150,000 additional jobs will be created, which will aid in decreasing the unemployment rate to 3.98 percent — a “golden” crossover point where GDP growth is above 4 percent and unemployment below 4 percent.

Taiwan's GDP is expected to fall within the range of 3.71 to 4.58 percent, said the research team. This a more optimistic outlook than the 3.59-percent growth estimate put forward by the Directorate-General of Budget, Accounting and Statistics (DGBAS, 主計處).

Citing improving investor confidence, easing policies and the climbing Financial Conditions Index, the research team predicts that in the first and second quarter of this year, economic growth will reach 0.99 and 1.03 percent, respectively. The team's figures exceed the DGBAS's forecasts of 0.45 and 0.74 percent for the respective periods.

In addition, the research team is confident that with central bank governor Perng Huai-nan at the helm, the New Taiwan Dollar can be expected to hold the NT$30 mark against the dollar.

However, a few concerns loom on the horizon, said the research team, citing the potential impacts the Italian election may have on Europe, and the fiscal situation in the U.S.

In Europe, the research team is concerned about the possible postelection stalemate in the Italian government, saying that while the country was able to issue and sell its 10-year treasury bonds, it did so at the high cost of a 4.83-percent yield rate. Future developments in Italy, and the potential ripple effect it may have across Europe remain major concerns, said the research team.

In the U.S., despite continuing quantitative easing (QE), issues concerning fiscal solvency remain a concern, said the research team, citing the impending effects of the recent failure to avoid the automatic US$85 billion budget cuts — often termed the “sequester” cuts, which may negatively impact the U.S.'s GDP by 0.5 to 0.6 percent.

4th Nuke Plant Impact

Within Taiwan, the research team cited political risk as the major deciding factor affecting economic growth this year, in particular the recent row over the fate of the Fourth Nuclear Power Plant. However, the research team said Taiwan will experience significantly heightened political risk in the next year as the impact of the results of the referendum on the fourth nuclear plant materialize, coupled with the impending seven-in-one elections.

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