The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday upgraded its GDP growth forecast for Taiwan this year to 4.03 percent, from the 3.85 percent that it estimated in July, and predicted the economy would grow 3.15 percent next year.
However, the institute warned that US president-elect Donald Trump’s return to the White House creates uncertainty about Taiwan’s foreign trade outlook.
Speaking at a seminar in Taipei, TIER president Chang Chien-yi (張建一) said the key word next year is “trade.”
Photo: Hsu Tzu-ling, Taipei Times
Chang said he felt “cautiously optimistic” about Taiwan’s economy next year.
If Trump were to raise tariffs as he pledged during the campaign, global trade volume would definitely decrease and the world would see a return of higher inflation, he said.
“If the US raises tariffs, would the countries being taxed retaliate, or would other countries impose taxes on each other? It will be several months before the impact on global prices is known,” Chang said.
The institute forecast that Taiwan’s consumer price index would rise 2.23 percent this year and 1.87 percent next year.
Domestic demand in Taiwan has remained stable this year, and exports of information and communications technology (ICT) products, semiconductors and artificial intelligence applications have continued to gain momentum, it said.
However, exports of the old economy sector slumped in the first half of the year, affected by China’s overproduction and the depreciation of the yen, it said.
The good news is that domestic investment has increased significantly since the third quarter, meaning that manufacturers in traditional industries have seen signs of opportunities and started related planning, it added.
As a result, next year’s economic growth is expected to be more comprehensive and evenly distributed between tech and non-tech sectors, the institute said.
The world’s two biggest economies — the US and China — are expected to face headwinds next year in terms of consumption and investment, it said.
However, Europe, Japan and emerging markets, including Southeast Asia, South Asia, Africa and Latin America, would see sustained recovery next year, which would benefit Taiwan’s exports, the institute said.
Facing the return of Trump to the White House, Taiwan must communicate well with the US government, especially on trade issues, as Taiwan’s trade surplus with the US might exceed that with China this year, Chang said.
The government must pay close attention to changes in US policies and propose contingency plans as early as possible, he added.
Taiwan plays an important role in the global ICT industry, but at the same time, Taiwan is also a small nation, Chang said.
If it wants to export to other markets, it must abide by the global order, especially when that order is dominated by a big nation, so thinking about how to communicate with Trump is important, he said.
The institute said Trump’s policies are expected to have an important impact on global political and economic development, which might also affect Taiwan’s overall trade performance.
Those policies could include lowering corporate taxes, raising tariffs, abolishing anti-inflation bills and green energy subsidies, restarting the petrochemical industry, increasing support for Israel, asking allies to increase military spending, and even considering withdrawing from NATO, it said.
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