The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth this year to 1.77 percent, from a previous estimate of 1.03 percent, as private consumption might stage a comeback fueled by the government’s Triple Stimulus Vouchers.
It is the first upgrade to Taiwan’s GDP growth forecast since COVID-19 broke out in late January, prompting research institutes at home and abroad to cut projections, citing concerns over tepid consumer spending and exports.
The latest forecast suggests a 72 percent increase from three months earlier, backed by a V-shaped recovery in tourism, despite the continued absence of foreign tourists and business travelers.
Photo: Chang Ching-ya, Taipei Times
“The stimulus vouchers of NT$3,000 per person might boost GDP growth by 0.44 percentage points,” meaning the institute would have to raise the growth rate anyhow, CIER president Chang Chuang-chang (張傳章) said.
Taiwan’s quick control of the virus outbreak has enabled people to lead a normal life with minimal social distancing requirements, the economist said.
Private consumption, which fell 1.58 percent in the first quarter and likely shrank 0.38 percent last quarter, might finish the year with a 0.87 percent increase, Chang said.
The pickup could increase to 1.33 percent if the vouchers help compound the wealth effect, he said.
The absence of lockdowns in Taiwan allows local companies, especially electronics suppliers, to benefit from order transfers and reap a boom in demand for devices used in remote working and learning arrangements.
Demand for laptops, data centers, servers and TVs remains strong this quarter, as confirmed cases escalate in many parts of the world, Taiwanese firms said, adding that unabated 5G spending also lends support to their business.
Taipei-based CIER said that overall exports would take a hit amid global economic downturns, but external demand might still make positive contributions due to a faster decline in imports.
Travel deficits might also taper off this year, as Taiwanese outspend foreign tourists on overseas vacations, government data showed.
Private investment, a main growth driver last year, might increase 0.25 percent this year, as firms turn cautious about expansion amid uncertainty, CIER said.
The government has stepped up investment and expenditure to bail out stressed companies and strengthen infrastructure, it said.
The institute expects unemployment to hover above 4 percent last quarter and this quarter due to the influx of new college graduates, and expects it to ease to 3.97 percent next quarter as the economy improves.
The New Taiwan dollar might trade at an average of NT$30.11 against the greenback this year, appreciating 2.66 percent from last year, as the US economy flounders, it said.
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