The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday cut its forecast for GDP growth this year to 2.01 percent from 2.72 percent it predicted in December last year, saying that global inflation, monetary tightening and geopolitical tensions would sap exports and leave it to private consumption to sustain the economy.
The downward revision was largely due to unfavorable external factors, such as the Ukraine war and inflation remaining above central bank targets in advanced economies, CIER president Yeh Chun-hsien (葉俊顯) said.
In addition, the US-China technology competition weighs on outbound shipments, as major Taiwanese electronics suppliers have large manufacturing facilities in China, Yeh said.
Photo: Taipei Times
Against that backdrop, exports, the main driver of GDP growth in Taiwan, are expected to contract 9.52 percent this year, while imports would shrink 9.49 percent, a stark contrast from last year’s solid gains of 7.41 percent and 12.06 percent respectively, the Taipei-based think tank said.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday said that inventory adjustments would affect it more and longer than expected, adding that end-market demand would remain weak for smartphones and personal computers next quarter.
The guidance was more conservative than three months earlier, when the Hsinchu-based company said that effects of inventory adjustments would end in the first half of the year.
Yeh said GDP growth would likely remain above 2 percent, as exports are expected to regain traction in the fourth quarter, consistent with TSMC chief executive officer C.C. Wei’s (魏哲家) remark that the company’s inventory would return to healthy levels in the final quarter.
CIER predicted a GDP contraction of 0.89 percent for last quarter and mild recovery in the quarter ahead.
Private consumption would emerge further from a COVID-19 slump, expanding 4.64 percent this year and contributing 2.08 percentage points to GDP growth, it said.
Consumer prices would increase 2.18 percent, higher than the central bank’s 2 percent target, driven by more expensive food, services and rents, it said.
Academia Sinica research fellow Ray Chou (周雨田) said Taiwan’s consumer price increases have been above the target for 21 straight months, indicating that inflationary pressures are not transient in nature.
The government might raise electricity prices a second time this year to keep unprofitable state-run Taiwan Power Co (台電) afloat, after an 11 percent increase this month, Chou said.
The jobless rate is to remain steady at 3.62 percent, while the New Taiwan dollar would trade at an average of NT$30.45 against the US dollar, CIER said.
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