Taiwan’s economy is set to stage a U-shaped recovery starting this quarter, as exports resume growth on the back of strong demand for artificial intelligence-related (AI) products and services, DBS Bank Ltd (星展銀行) said yesterday.
However, the Singaporean bank kept its forecast of Taiwan’s GDP growth unchanged at 0.5 percent for this year on grounds that consumption growth would moderate and normalize.
“We anticipate a U-shaped recovery [in Taiwan] starting from this quarter with GDP growth of 2 percent,” Singapore-based DBS Bank economist Ma Tieying (馬鐵英) told an online news conference, adding that the growth momentum would accelerate to 3 to 4 percent early next year.
Photo: Ritchie B. Tongo, EPA-EFE
The prolonged global challenges linked to smartphone and PC inventories would fade away in the second half of this year, allowing major technology brands to introduce next-generation products and attract consumers to upgrade, thus facilitating the replacement cycle, Ma said.
Furthermore, the adoption of ChatGPT is fueling investment in generative artificial intelligence (AI), leading to increased demand for high-performance graphics processing units and optimized semiconductor devices, she said.
Taiwan is well positioned to benefit from the surge in AI-related chip demand in that Taiwan Semiconductor Manufacturing Co (台積電) plays a prominent role in global advanced logic chip production, Ma said.
Exports of electronic components, information and communications products, as well as precision instruments swung to positive growth of 2.7 percent in July and August, she observed.
Specifically, shipments of information and communications products surged 48.6 percent, a hefty gain from the 3.7 percent increase seen in the second quarter, Ma said.
However, the outlook remains evasive for Taiwan’s non-tech sectors, DBS said, as exports of chemicals, metals, plastics and rubber have not shown clear signs of recovery.
China’s high debt levels would discourage rapid advances in property and infrastructure investments, which could weigh on global demand for industrial metals, construction materials and other commodities, Ma said.
In addition, consumption growth might moderate this quarter, following a V-shaped recovery in the first nine months, the economist said. The benefit of revenge consumption has largely materialized, but a resilient labor market should support consumption growth at healthy levels, she said.
DBS raised its inflation forecast for this year from an increase of 1.4 percent to 1.7 percent after the consumer price index last quarter climbed 2.4 percent, faster than expected.
The central bank is to maintain a hawkish tone while holding policy rates steady for the rest of this year and next year, Ma said.
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