Taiwan’s economy could expand by 2.27 percent next year, slower than the estimated 2.53 percent increase this year, as stable global growth is expected to continue to boost exports, but low-base benefits are tapering off, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
The updates suggested slightly upward revisions from a forecast in October on the back of stronger exports.
“A stable global economy would continue to supply growth momentum, but the pace might soften in the absence of a low comparison base,” CIER president Wu Chung-shu (吳中書) told a news conference in Taipei.
Taiwan is home to the world’s largest contract chipmakers and chip designers, as well as makers of camera lenses, casings and other critical components used in smartphones, laptops and other consumer electronics.
Inventory demand is expected to slow next year after global technology brands launched latest-generation devices relatively late this year, and the market might need time to gather replacement momentum.
Domestic demand is expected to play a more active role in driving growth next year as exports let off some steam, Wu said.
The Cabinet’s Forward-looking Infrastructure Development Program is intended to lend force to capital formation next year and beyond, he said.
Total fixed investment is forecast to increase 2.79 percent next year, from a minor 0.56 percent gain this year, the report said.
Major Taiwanese technology firms have been conservative about capital spending this year, with private investment contracting 3.65 percent in the third quarter, Wu said.
Private investment mostly stayed in negative territory this year, suggesting caution on the part of companies about their business prospects and the investment environment, he said.
The government could help by making Taiwan more business friendly by implementing a stable supply of water, electricity, land and labor, he added.
The 3 percent pay raise for government employees next year could prompt the private sector to follow suit, giving people more money to spend, Wu said.
That is favorable for private consumption, which is projected to reach 2 percent next year, which is still less compared with an estimated 2.18 percent gain this year, the report said.
Consumer prices are likely to grow at a benign 0.99 percent next year, slightly higher than this year’s 0.56 percent increase, it said.
Downside risks include the US tax reform, foreign exchange volatility, monetary policies and geopolitical tensions, it said.
The Taipei-based institute expects the New Taiwan dollar to fall further at an average of NT$30.23 against the US currency next year, from NT$30.46 this year.
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