The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday cut its forecast for GDP growth for the second time this year to 1.27 percent, from 1.53 percent three months earlier, after exports fared worse than previously expected.
Downside risks remain for the forecast if oil prices fall and electronics sales fail to stage a strong comeback in the second half, the Taipei-based think tank said.
“The nation’s economy might have difficulty staying above the 1 percent mark this year again if external headwinds continue to sap demand for consumer electronic devices,” TIER’s Economic Forecasting Center director Gordon Sun (孫明德) told a media briefing in Taipei.
Taiwan is home to critical component suppliers of international handset, tablet and computer brands, with electronics shipments accounting for 25 percent of overall commodity sales, Sun said.
Various goods make up about 80 percent of exports, while services generate the remaining 20 percent, affirming the vulnerability of the domestic economy, Sun said.
The institute now expects exports to contract 4.3 percent this year, worse than a previously estimated decline of 1.75 percent, after outbound shipments retreated by a double-digit percentage in the first quarter, Sun said.
The pace of contraction has yet to show concrete signs of easing, such as export orders that used to be a reliable bellwether of actual exports one to three months ahead, the economist said.
The saturated smartphones and personal computer markets account for the slowdown and a lack of eyebrow-raising innovations would deepen the trend, Sun said, alluding to the next generation of iPhone models.
Oil prices appear to have stabilized for the time being, but the problem of oversupply lingers after oil-producing countries failed to hash out a production cap a week ago, Sun said.
The global backdrop might drive companies to avoid aggressive investment, leaving the government to assume an active role, Sun said.
“The government should take action to help southern and eastern counties that will bear the brunt of a sharp drop in the number of Chinese tourists,” though tourism revenue contributes little to GDP, he said.
Alishan (阿里山) in Chiayi County, Sun Moon Lake (日月潭) in Nantou County and Taroko Gorge (太魯閣) in Hualien County are the most popular destinations for Chinese tourists.
The number of Chinese tourists might decline for the first time since 2008, depending on how the incoming government handles the cross-strait relationship, TIER said.
The think tank raised its inflation forecast by 0.38 of a percentage point to 1.09 percent for this year, not because of stronger demand, but due to steep vegetable price hikes in the wake of cold snaps earlier this year, the report said.
That translates to a higher costs of living for most Taiwanese, it said.