Fri, Jul 28, 2023 page12

• Academia Sinica cuts GDP prediction

  UNCERTAINTY: Private consumption would be the only bright spot this year, looking set to expand as domestically focused sectors emerge from COVID-19 restrictions

  • By Crystal Hsu / Staff reporter
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  Academia Sinica yesterday lowered its forecast for Taiwan’s GDP growth this year by almost half to 1.56 percent, from its previous prediction of 2.41 percent, saying weak exports and lingering uncertainty warranted downward revisions.

  “A global economic slowdown induced by monetary tightening by major central banks is curtailing demand for goods and services worldwide,” Academia Sinica Institute of Economics adjunct assistant research fellow Lin Chang-ching (林常青) said.

  Sales of technology products remain poor despite several quarters of inventory adjustments, Lin said.

  

  Academia Sinica adjunct assistant research fellow Lin Chang-ching poses for a photograph at a news conference in Taipei yesterday.

  Photo: Hsu Tzu-ling, Taipei Times

  “Since external demand remains tepid ahead, we decided to lower our economic growth projection for this year to 1.56 percent,” he said.

  The economic slowdown is hitting both technology and non-tech products, but the pace of decline in the second half should be less serious than in the first half, the institute said.

  Exports are likely to fall 6.05 percent year-on-year this year, while imports would decline by 6.01 percent, it said.

  Taiwan might continue to enjoy a trade surplus this year, but the volume would shrink by 5.22 percent from the level seen last year, it said.

  Economic uncertainty and foggy order visibility prompt local firms to refrain from capital spending, the institute said, forecasting a 2.8 percent annual retreat in private investment.

  Private consumption would be the only bright GDP component, looking set to expand by 5.77 percent from a year earlier, as domestically focused sectors emerge further from COVID-19 restrictions, Academia Sinica said.

  The retail and hospitality sectors reported steep advances in business in the first six months of this year, with their turnover growing 8.99 percent and 26.27 percent respectively from a year earlier, it said.

  Makers of transportation tools and garments as well as department stores all posted more than 10 percent growth, it said.

  Private consumption should see steady growth, supported by a stable job market and moderate inflation, the institute said.

  Consumer prices would increase by 2.11 percent this year, slightly higher than the central bank’s 2 percent target, which prompted the monetary policymaker to hold interest rates unchanged last month and likely for the rest of this year, it said.

  The institute listed three major uncertainties in the second half of this year that could impact the economy, including China’s economic slowdown, the spillover effects of tightening monetary policies in major economies and geopolitical risks. Among them, the economic uncertainty in China could have the greatest impact on Taiwan, it added.

  Academia Sinica is the latest of several think tanks in Taiwan to forecast less than 2 percent GDP growth for this year. The Taiwan Institute of Economic Research on Tuesday downgraded its growth forecast to 1.66 percent, from 2.31 percent in April, while the Chung-Hua Institution for Economic Research on Thursday last week lowered its growth estimate to 1.60 percent from a previous estimate of 2.01 percent made in April.

  Additional reporting by CNA
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