The economy is forecast to grow 1.65 percent annually next year, mildly better than an estimated 1.17 percent for this year, as the world embarks on a bumpy and fragile recovery amid increasing protectionism, the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) said yesterday.
“Donald Trump’s victory [in Tuesday’s US presidential election] adds uncertainty to global trade and Taiwan would be lucky to fare steady given its heavy dependence on the US,” TIER Economic Forecasting Center director Gordon Sun (孫明德) told a news briefing.
Trump has pledged to take jobs back from Asian countries — including Taiwan — by making US firms manufacture products at home.
Taiwan is a leading supplier of chips, camera lenses, batteries, casings and other electronic components for smartphones, tablets and notebook computers.
Trump’s move might drive other countries to follow suit, making it more difficult for the nation’s export-focused economy where most companies manufacture products on behalf of global brands for thin profits.
Taiwanese firms might consider moving manufacturing facilities to the US to resolve potential trade disputes, Sun said, adding that Japanese automakers did the same to avoid a boycott years ago.
Trump also opposes free trade. However, even without his winning the presidency, global trade has slowed in recent years due to the oil price collapse and an ongoing shift from hardware devices to software applications, government officials and economists have said.
Against this backdrop, Taiwan’s export performance could remain slack next year, leaving domestic demand to drive growth, Sun said.
Exports and imports are forecast to grow annually by 3.26 percent and 3.67 percent respectively next year, as international crude oil prices stabilize and the global economy improves, TIER said.
The Taipei-based think tank expects private consumption to pick up 1.81 percent next year, while capital formation is forecast to gain 1.98 percent, as local semiconductor makers buy more advanced equipment to maintain their technological edge.
Flat-panel makers might also raise capital spending next year, in anticipation of an increase in replacement demand, TIER said.
Private consumption growth might be slower than the estimated 2.03 percent increase for this year due to stagnant wages, Sun said.
Consumer prices could edge up, but remain benign at 1.3 percent next year, while the wholesale price index recovers to positive territory with a 1.42 percent increase, TIER said.
As for central bank policies, the US Federal Reserve could raise interest rates next year, while its other global peers are likely to maintain their loose monetary policy, Sun said.
TIER also raised its GDP forecast for this year from 0.77 percent to 1.17 percent after economy in the first three quarters of the year fared stronger than expected.
The current quarter could prove the best quarter this year, thanks to a low base last year, the institute said.
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