S&P said that Taiwan will be the only economy among the four "Asian tigers" to post GDP growth below the 2 percent mark this year. According to S&P, South Korea and Hong Kong are expected to see their GDPs grow by 2.7 percent, while the economy in Singapore could grow by 2.1 percent.
The ratings agency said that Taiwan is expected to continue to be haunted by falling global demand and the slower pace of China's economic growth. It added that Taiwan is also faced with the government's conservative fiscal policy, which is unlikely to give a significant boost the country's economy.
In addition to the GDP lagging behind the other three Asian tigers, S&P said that Taiwan's economic growth for 2016 will fall behind the average of 2.4 percent to be posted by the emerging industrial economies in Asia as a whole.
However, the latest S&P forecast for Taiwan's GDP growth for 2016 is still more optimistic than those of several local think tanks and even the government itself.
Among the pessimistic economic think tanks, the Taiwan Institute of Economic Research (TIER, 台經院) said that Taiwan's GDP could grow by only 1.27 percent, the lowest forecast so far, while the Chung-Hua Institution for Economic Research (CIER 中經院) has anticipated that the economy will grow by 1.36 percent, and Yuanta-Polaris Research Institute (元大寶華經濟研究院) has put its number at 1.42 percent.
The Directorate General of Budget, Accounting and Statistics (DGBAS) forecast in February that the GDP will grow 1.47 percent in 2016. However, many economists expected that the DGBAS will lower its forecast when it announces an update on Friday.
Switzerland-based banking group UBS, however, has left its forecast for Taiwan's 2016 GDP growth unchanged at 2 percent, since the U.S. economy is on the road to recovery and it is unlikely that China's economy will suffer a hard landing, despite slowing growth.
UBS said that the market has appeared too pessimistic about Taiwan's economy, adding that even though the country had a power transition May 20, the new government is unlikely to surprise the market by making any political decisions to undermine cross-Taiwan Strait ties. Instead, the new government will be gearing up to boost the local economy.
Citigroup, another major global banking group, said that Taiwan's economy will grow by only 1.3 percent in 2016, since there are few signs that the country's exports, which serve as the backbone of its economy, will pick up anytime soon.
Taiwan's exports in April fell 6.5 percent a year earlier from the previous year, marking the 15th consecutive month of a year-on-year fall, a stretch of negative growth even longer than that seen during the global financial crisis of 2008 and 2009.
Taiwan has also encountered escalating competition in the global market, Citigroup said, adding that political uncertainty is still depressing domestic demand.
But Citigroup said that Taiwan's GDP will improve in 2017 to grow by 2.0 percent from a year earlier.
(By Tsai Yi-chu and Frances Huang)