The outlook for Taiwan’s economy remains strong, as the buzz around artificial intelligence (AI) has powered demand for semiconductors and electronic components, and driven growth in exports since the first quarter, Taiwan Ratings Corp (中華信評) said yesterday.
Moderate consumer spending should also support the economy and help lift overall GDP growth to 4 percent this year, the ratings agency said.
In December last year, Taiwan Ratings projected 3 percent growth this year.
Photo: Daniel Ceng, EPA-EFE
In its latest forecasts, it said that the nation’s headline inflation would likely increase by 2.1 percent this year, higher than the central bank’s 2 percent target.
However, that would put no pressure on the central bank to pivot, the ratings agency said, expecting it to keep its policy rates unchanged this year.
The New Taiwan dollar is forecast to trade at 32.4 versus the US dollar on average this year, it said.
The local currency yesterday fell 0.14 percent to close at NT$32.540 against the US dollar in Taipei trading.
The predictions were part of the ratings agency’s presentation for the Taiwan Mid-Year Credit Outlook delivered in Taipei yesterday.
However, Taiwanese firms face risks in the next few quarters such as economic problems in China, as a crippled property sector, tepid confidence, high debt levels and trade war risks are expected to affect growth in the world’s second-largest economy, the local branch of S&P Global Ratings said.
As for the global economic growth, a sharper-than-expected slowdown would intensify divergence across household cohorts and industrial sectors, S&P said.
At the same time, rising trade tariffs could prompt businesses to review supply chains, increasing their costs due to relocations, while if interest rates remain high, it would exacerbate interest burdens for debt refinancing and hit weaker credit issuers hard, it said.
In addition, Taiwan Ratings also identified several structural risks facing firms in terms of geopolitics, climate change and technology.
Escalating geopolitical tensions could hinder policy predictability and increase financial market volatility, while extreme weather and energy transition would pose challenges and raise operating costs for businesses, Taiwan Ratings said.
Meanwhile, accelerating technological advancement and mounting cyberattacks would disrupt business operations, it said.
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