Academia Sinica yesterday upgraded its GDP growth forecast for Taiwan this year to 4.23 percent from a previous estimate of 3.88 percent in July, citing higher contributions from private investment driven by demand for technology.
As momentum in private investment and external demand are expected to remain strong next year, the institute forecast GDP would expand 3.1 percent on an annual basis.
However, if US president-elect Donald Trump, who is to take office next month, implements tariff protection policies it might have a negative impact on the global economy, Academia Sinica Institute of Economics adjunct research fellow Lin Chang-ching (林常青) said.
Photo: Hsu Tzu-ling, Taipei Times
In addition, as the US Federal Reserve announced last week that it might slow down its rate cut trajectory, the global financial environment might become unstable, Lin said.
He also said that China’s economic recovery faces grave challenges in the new year. If the US implements tariff policies and adjusts foreign exchange rates, it might negatively affect Asian currencies and impact the pace of recovery in China.
The institute’s economic growth forecast came after the central bank last week revised upward its estimates to 4.25 percent for this year and 3.13 percent next year.
The Directorate-General of Budget, Accounting and Statistics last month said its growth predictions were 4.27 percent for this year and 3.29 percent next year.
On a positive note, Taiwan might see considerable opportunities in artificial intelligence (AI) applications next year, Lin said.
As applications such as drones, robots and low-orbit satellites are already booming, it remains to be seen whether there would be further breakthroughs in AI next year, he said, adding that the institute has raised its private investment growth forecast to 4.70 percent for this year and 5.46 percent next year, thanks to demand for AI, low-carbon development and industrial automation.
Robust demand for AI applications and high-performance computing devices also led the institute to maintain its annual growth forecast of 9.17 percent for real goods and service exports this year and 6.53 percent next year.
Despite positive factors such as wage growth, stock market rallies and travel demand, a higher comparison base is expected to limit growth in private consumption to 2.68 percent this year and 2.02 percent next year, lower than the 2.09 percent forecast by the DGBAS, the institute said.
Academia Sinica is less optimistic than other research institutes on inflation as it forecast that the consumer price index would register annual growth of 2.02 percent next year, following 2.19 percent this year, making it the only institute that expects the inflationary gauge to exceed the central bank’s 2 percent target.
In addition, the institute citing a survey warned that rent hikes would become a major source of pressure for high inflation, given that 24.3 percent of landlords have increased rents over the past three years and about 30 percent plan to do so in the next one to two years.
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