The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth this year to 3.96 percent from 3.81 percent, as strong global demand for artificial intelligence (AI) bolsters exports and domestic demand receives support from improving private investment and a positive wealth effect.
“The development of artificial intelligence by major technology titans has positively impacted Taiwan’s economy as seen by robust business at local firms in its supply chain,” CIER president Lien Hsien-ming (連賢明) said.
Companies involved in making AI chips, servers and graphics processing units have posted growing revenues and profit margins, and offered guidance that the momentum would continue for the foreseeable future, CIER said.
Photo: Hsu Tzu-ling, Taipei Times
Exports are projected to expand 6.73 percent year-on-year this quarter, slowing from 8.05 percent in the preceding quarter due to a high comparison base, the Taipei-based institute said.
Imports are expected to rise 9.24 percent annually this quarter, as firms acquire capital equipment from abroad to upgrade technology processes and expand capacity, it said.
For the whole of this year, exports are likely to rebound 9.24 percent, reversing a 9.8 percent decline last year, CIER said, adding that it expects imports to emerge from a 17.86 percent contraction to log a 9.92 percent increase.
On the domestic front, private consumption is expected to gain 2.22 percent this quarter with national holidays and major retail sales seasons approaching, Lien said.
Many department stores are celebrating their anniversaries and the Singles’ Day shopping festival next month would lend further support to e-commerce revenues, the think tank said.
This quarter is also the high season for sales of hotel and restaurant coupons, as well as tour packages at home and overseas, in line with the annual travel fair next month, it said.
Overall, consumer spending might increase 2.67 percent this year on top of an 8.19 percent advance last year, it said.
The sturdy private consumption has to do with wealth inflation induced by the TAIEX, Lien said.
In addition, private investment is playing an important part in upholding domestic demand, with the key GDP component predicted to rise 2.89 percent this year, in stark contrast with an 8.24 percent retreat last year, CIER said.
Improved business orders have allowed local firms to grow more comfortable with capital expenditure, it said.
Consumer prices are expected to increase 2.17 percent this year, but fall below the central bank’s 2 percent target at 1.96 percent next year, the institute said.
Electricity rate hikes and bad weather have kept service charges and food costs elevated this year, Lien said.
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