Taiwan’s economy might grow 3.8 percent this year amid robust external demand, but might only gain 1.7 percent next year, as key export drivers such as chips are losing steam, Moody’s Analytics said yesterday.
The Asia-Pacific region, including Taiwan, is outpacing most of the world’s economies with regional GDP growth expected to average 3.9 percent this year and 4 percent next year, faster than expected global GDP growth of 2.6 percent and 2.7 percent respectively, the research body said.
However, economic conditions within the region vary widely, it said.
Photo: Ritchie B. Tongo, EPA-EFE
Taiwan has enjoyed robust growth in exports thanks to the rise of artificial intelligence (AI), which has fueled demand for advanced semiconductors, it said.
Taiwan’s exports in the first eight months of this year expanded 10.9 percent year-on-year to US$308.57 billion, thanks to demand for electronics used in cloud-based data centers and the development of AI applications, government data showed.
The AI boom has not lifted Southeast Asia, which mainly produces low to mid-tier chips. Trade has played a key driver of growth for much of the region, but its impact has been uneven, Moody’s Analytics said.
Nevertheless, external demand in the region has been treading water due to slowing US growth and Europe’s stalled economy, it said.
Specifically, growth in global chip billings has decreased in the past few months, suggesting that shipments of tech products would decline, with no guarantee that domestic demand would offset the drop, Moody’s Analytics said.
At the same time, consumer prices are cooling in the region despite intermittent hiccups linked to bad weathers, it said, as is the case with Taiwan.
Moody's Analytics said that inflation is mostly in line with central bank targets even though risks are still skewed toward inflation overshooting rather than undershooting.
Food prices are jumpy and energy prices hover above pre-pandemic averages, it said, noting that a flare-up in commodity prices could stoke inflation and fuel monetary tightening.
Taiwan’s central bank last week left key policy rates intact, but hiked the required reserve ratio and stiffened lending terms to rein in the housing market, at odds with a rate cut by the US Federal Reserve to support the economy.
Meanwhile, elections in the US and Europe would further complicate the growth outlook, it said.
Potential shifts in US economic policy following the presidential election in November are a major concern, as US exports drive growth for much of the region, it said, adding that economies heavily dependent on strong US ties would be most affected.
The US has grown into Taiwan’s second-largest export destination due to a rapid increase in shipments of AI-related electronics.
Moody’s Analytics expects regional currencies to appreciate going forward after the US Federal Reserve cut interest rates by 50 basis points last week and its median projections suggest more cuts of 50 basis points toward the end of this year.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort