The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday cut its forecast for the nation’s GDP growth this year by 0.27 percentage points to 2.31 percent, as exports and private investment fare weaker than expected amid a global economic slowdown.
The projection made the Taipei-based think tank the most optimistic among local research bodies as it believes the domestic front would hold firm with support from the government.
Exports, the key growth driver that accounts for about 60 percent of GDP, shrank by double-percentage points in the first quarter and would not come out of the woods until the fourth quarter, meriting a downward growth revision, TIER Economic Forecasting Center director Gordon Sun (孫明德) told an online news conference.
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Exports would contract 7.08 percent this year, while imports would decline 9.18 percent, Sun said.
The institute previously forecast that outbound and inbound shipments would advance.
The pain induced by major central banks’ drastic interest rate hikes would grow more evident this year, sapping global demand for goods and services, he said.
Taiwanese exporters, especially electronics suppliers, have been hit hard, with many reporting disappointing first-quarter results, Sun said, adding that a meaningful recovery hinges on inventory adjustments, which would take longer than expected.
The backdrop is unfavorable for fixed capital formation and private investment, with the former forecast to squeeze in a tiny 0.42 percent growth while the latter would fall 0.32 percent, as businesses turn cautious about capital spending, the institute said.
The government and public enterprises would lend support by increasing their investment and expenditure to bolster overall domestic demand, Sun said.
The institute is sticking to its forecast growth of 5.95 percent for private consumption, the mainstay of GDP growth this year, Sun said.
TIER is less pessimistic compared with other institutes, because it has tracked business confidence for different sectors and discerned a sentiment pickup for several straight months.
The sentiment gauge for the manufacturing industry last month gained 2.24 points for the fifth month to 93.95, although companies with positive views decreased to 26.1 percent and more companies turned conservative, it said.
The confidence reading for service providers rose 1.52 points to 96.75, the strongest since August last year, it said.
Interest rate hikes have benefited the wealth management business and credit card charges received a boost from rising overseas travel, it said.
The sentiment value for construction companies and real-estate brokers dropped 2.02 points to 91.25, as pricing differences continued to slow transactions, it said.
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