The Chung-Hua Institution for Economic Research (CIER) on Friday lowered its forecast for Taiwan’s GDP growth for this year to 1.38 percent, citing weakening global demand, but said that there is a light at the end of the tunnel thanks to growing emerging technology applications.
The 1.38 percent growth is 0.22 percentage points lower than its previous estimate of 1.6 percent in July, the Taipei-based think tank said.
However, Taiwan is still expected to enjoy solid domestic consumption in the post COVID-19 era, offsetting the impact of a drop in exports, it said.
Photo: Hsu Tzu-ling, Taipei Times
CIER’s forecast came after the IMF earlier this month predicted that Taiwan’s economy would grow 0.8 percent this year, down from its previous estimate of 1.3 percent in April.
The central bank on Sept. 21 also lowered its growth forecast for Taiwan from 1.72 percent to 1.46 percent, while the Directorate-General of Budget, Accounting and Statistics in August cut its forecast from 2.04 percent to 1.61 percent.
For this year as a whole, CIER forecast that Taiwan’s private consumption would grow 7.04 percent from a year earlier, up from its July forecast of a 5.56 percent increase, with CIER president Yeh Chun-hsien (葉俊顯) attributing the change to an increase in domestic spending.
The increase in private consumption is expected to boost this year’s GDP growth by 3.17 percentage points, the think tank said.
However, Taiwan’s exports are expected to remain weak, with merchandise and services falling 3.36 percent this year, compared with an earlier estimated decline of 3.77 percent, CIER said.
Merchandise and services imports would drop 3.31 percent, improving from the 3.27 percent decline forecast earlier, it said.
Many Taiwanese companies have become reluctant to invest in expansion plans, as they are cautious about overseas demand due to rising inflation and aggressive rate hikes by major central banks, CIER said.
As a result, Taiwan’s private investment is expected to decline 6.55 percent this year, compared with the 1.36 percent drop previously forecast, with capital formation likely to fall 4.73 percent, more than the 0.42 percent decline predicted earlier, the think tank said.
However, there have been signs that the situation is improving thanks to the rising popularity of emerging technologies, in particular artificial intelligence (AI) development, Yeh said.
AI development is expected to encourage Taiwanese tech companies to invest next year amid a revival in exports, he said.
Taiwan’s exports next year would improve from this year due to a low comparison base and reduced inventory levels, Cathay United Bank (國泰世華銀行) lead economist Lin Chi-chao (林啟超) said.
CIER said that Taiwan’s GDP would grow 3.03 percent next year, with exports and imports likely to rise 5.58 percent and 5.81 percent respectively.
Private investments are expected to grow 2.92 percent next year, while private consumption would increase 2.09 percent, it said.
Consumer prices are expected to grow 2.24 percent this year and 1.86 percent next year, CIER added.
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