The Asian Development Bank (ADB) has raised its growth forecast for Taiwan’s economy from 3 percent to 3.5 percent this year, as strong global demand for electronics is boosting exports, particularly semiconductors used in advanced technology and artificial intelligence (AI) applications.
GDP expanded by 6.6 percent in the first quarter, led by a 9.1 percent rebound in exports buoyed by strong demand for electronics and AI-related goods, the ADB said in a report on Wednesday.
Imports grew by 0.8 percent, resulting in a net gain of 5.5 percentage points in external demand to GDP growth, the bank said.
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At the same time, private consumption moderated slightly and private investment remained weak, but has likely bottomed out and would stay on a course of gradual pickup this year, the ADB said.
However, export growth displayed signs of mitigation in the second quarter, judging by a 9.9 percent advance that missed the Directorate-General of Accounting, Budget and Statistics’ forecast by 4.6 percentage points, while imports grew faster at 12.7 percent, Ministry of Finance data showed earlier this month.
The figures suggest that growth momentum would moderate year-on-year moving forward, as the low base effect fades away, the ADB said.
That is because consumer spending would slow down further, but private investment would pick up in a modest fashion, helped by the uptick in exports, it said.
While inflation is moderating toward pre-COVID-19 pandemic levels in the region as a whole, price pressures remain elevated in some economies, the ADB said, adding that it stands by its inflation forecast of 2.3 percent for this year.
Most regional central banks continue to hold policy rates steady although easing is gathering pace, it said, pointing out that 30 percent of monetary policy decisions in the first half of this year were rate cuts, compared with 14 percent for last year.
Taiwan and Indonesia bucked the mainstream by hiking rates to cool inflation expectations and support its currency respectively, the ADB said.
The ADB raised its forecast for GDP growth in developing Asia and the Pacific from 4.9 percent to 5 percent this year, as other economies such as South Korea also benefit from the positive global technology cycle.
“Most of Asia and the Pacific are seeking faster economic growth, compared with the second half of last year,” ADB chief economist Albert Park said in the report.
The region’s fundamentals hold strong, but policymakers still need to pay attention to a number of risks that could affect the outlook, from uncertainty related to election outcomes in major economies to interest rate decisions and geopolitical tensions, Park said.
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