Several major think tanks in Taiwan are expected to revise down their forecast for annual GDP growth this week, following Academia Sinica’s cut of its growth forecast for this year to 1.94 percent on Wednesday last week.
The weaker-than-expected economic momentum in the second quarter, caused by continuous global economic uncertainties, would be the major factor dragging down these institutes’ latest forecast, economists said.
“It is difficult for the nation’s economy to grow more than 3 percent this year,” director of the Chung-Hua Institution for Economic Research’s (CIER, 中華經濟研究院) center for economic forecasting Liu Meng-chun (劉孟俊) said by telephone.
Liu cited weak overseas and domestic demand as exports fell 4.7 percent from a year ago in the first six months of the year, with private consumption slower in the same period due to the government’s decision to raise energy prices.
Liu’s views confirmed that the CIER — which is scheduled to update its full-year economic growth forecast today — will cut the figure from the 3.55 percent growth it estimated in April.
The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院), which is set to release its latest growth forecast tomorrow, may also follow the trend, as the think tank estimated in April that economic expansion would reach 3.48 percent this year.
“Taiwan’s economic growth in the second quarter may be lower than that in the first quarter as a result of the impact of slowing domestic demand,” director of TIER’s macroeconomic forecasting center Gordon Sun (孫明德) said.
Many economists had previously thought Taiwan’s economy would bottom out in the first quarter, but it turned out that GDP in the second quarter may show a contraction because of the deteriorating domestic demand, Sun said.
Renewed worries about the nation’s economic prospects have placed speculation and discussion about the central bank possibly cutting interest rates back on the table.
The central bank on June 21 decided to keep its key interest rates unchanged for the fourth consecutive quarter and left its discount rate at 1.875 percent. The bank is expected to review its monetary policy adjustment at a board meeting in late September.
“Taiwan’s policy rate outlook is less than clear at this juncture,” Grace Ng (吳向紅), a Hong Kong-based economist at JPMorgan Chase Bank, said in a report issued on Wednesday last week.
Three months ago, there was a lot of discussion about the need for the central bank to raise policy rates, given the impact electricity and fuel price hikes had on inflation and on driving up uncertainty over the policy rate outlook, Ng said.
JPMorgan said it now views Taiwan’s near-term policy rate outlook as a close call.
“[Only] in the event that the external environment worsens further, will the probability of moderate rate cuts by the central bank rise in the coming months,” Ng said.
On the exchange rate front, it seems that policymakers have been keen to maintain a competitive currency through the economic cycles in support of the export sector, she added.
Cheng Cheng-mount (鄭貞茂), chief economist at Citigroup in Taipei, shared Ng’s views.
“The central bank still has many other tools and open-market operations, such as cutting the overnight interbank call-loan rate, to deal with the current economic situation in Taiwan,” Cheng said by telephone.
Cheng said that he sees no need for the central bank to cut the nation’s policy rates further in the second half of this year given the current low level of rates.
Nonetheless, the central bank has been gradually driving down the overnight interbank call-loan rate since last week, with the rate falling 0.014 percentage points to 0.391 percent on Friday last week, marking the lowest level in nearly 11 months. In the past seven trading sessions, the rate has declined by 0.118 percentage points.
A lower overnight interbank call-loan rate will drag down short-term financing costs for banks, which may further lower domestic firms’ financing costs and raise the market’s liquidity.
Australia and New Zealand Banking Group Ltd said in a report on Friday that the central bank will continue to lower the interbank overnight rates in a bid to reduce banks’ borrowing costs.
ELECTRONICS BOOST: A predicted surge in exports would likely be driven by ICT products, exports of which have soared 84.7 percent from a year earlier, DBS said DBS Bank Ltd (星展銀行) yesterday raised its GDP growth forecast for Taiwan this year to 4 percent from 3 percent, citing robust demand for artificial intelligence (AI)-related exports and accelerated shipment activity, which are expected to offset potential headwinds from US tariffs. “Our GDP growth forecast for 2025 is revised up to 4 percent from 3 percent to reflect front-loaded exports and strong AI demand,” Singapore-based DBS senior economist Ma Tieying (馬鐵英) said in an online briefing. Taiwan’s second-quarter performance beat expectations, with GDP growth likely surpassing 5 percent, driven by a 34.1 percent year-on-year increase in exports, Ma said, citing government
‘REMARKABLE SHOWING’: The economy likely grew 5 percent in the first half of the year, although it would likely taper off significantly, TIER economist Gordon Sun said The Taiwan Institute of Economic Research (TIER) yesterday raised Taiwan’s GDP growth forecast for this year to 3.02 percent, citing robust export-driven expansion in the first half that is likely to give way to a notable slowdown later in the year as the front-loading of global shipments fades. The revised projection marks an upward adjustment of 0.11 percentage points from April’s estimate, driven by a surge in exports and corporate inventory buildup ahead of possible US tariff hikes, TIER economist Gordon Sun (孫明德) told a news conference in Taipei. Taiwan’s economy likely grew more than 5 percent in the first six months
SMART MANUFACTURING: The company aims to have its production close to the market end, but attracting investment is still a challenge, the firm’s president said Delta Electronics Inc (台達電) yesterday said its long-term global production plan would stay unchanged amid geopolitical and tariff policy uncertainties, citing its diversified global deployment. With operations in Taiwan, Thailand, China, India, Europe and the US, Delta follows a “produce at the market end” strategy and bases its production on customer demand, with major site plans unchanged, Delta president Simon Chang (張訓海) said on the sidelines of a company event yesterday. Thailand would remain Delta’s second headquarters, as stated in its first-quarter earnings conference, with its plant there adopting a full smart manufacturing system, Chang said. Thailand is the firm’s second-largest overseas
Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) market value closed above US$1 trillion for the first time in Taipei last week, with a raised sales forecast driven by robust artificial intelligence (AI) demand. TSMC saw its Taiwanese shares climb to a record high on Friday, a near 50 percent rise from an April low. That has made it the first Asian stock worth more than US$1 trillion, since PetroChina Co (中國石油天然氣) briefly reached the milestone in 2007. As investors turned calm after their aggressive buying on Friday, amid optimism over the chipmaker’s business outlook, TSMC lost 0.43 percent to close at NT$1,150