The Yuanta-Polaris Research Institute (元大寶華綜經院) yesterday raised its forecast for the nation’s GDP growth this year to 2.4 percent, from 2.2 percent it projected three months earlier, as Taiwan continues to benefit from a global expansion, although the cycle is about to peak.
The upward revision came even though the Taipei-based think tank forecast a mild slowdown in outbound electronics shipments and expects oil price hikes to boost non-technology products.
Global trade volume, the purchasing managers’ index, corporate confidence and other bellwethers all showed that the global economy might fare stronger this year than last year, boding well for the nation’s exports, institute president Liang Kuo-yuan (梁國源) said.
The up-cycle is about to plateau following monetary policy normalization by major central banks to ease inflationary pressure, he said.
The US Federal Reserve last week raised policy rates by 25 basis points, in line with guidance it provided in December last year.
Furthermore, trade barriers loom large and appear imminent as US President Donald Trump executes his plans to rein in trade deficits, Liang said.
The Trump administration has hobbled the WTO; encouraged China and other nations to lean on their neighbors for economic loyalty; undercut agreements on tax evasion and climate change; and pushed US allies to negotiate free-trade and cross-border investment deals without the US, he said.
The strategy is expected to be seriously harmful, as it would encourage autocrats to follow suit and democratic allies to retaliate in kind, he added.
Taiwan would be the victim most hurt by protectionist measures due to its significant exposure to the global technology supply chain, he said.
“All should brace for economic and financial turbulence as tensions between the US and China play out,” Liang said.
The institute predicted that private investment would grow 4.03 percent this year, from 3.03 percent last year, while private consumption could pick up 2.55 percent, compared with 2.22 percent last year.
Exports are likely to gain 2.95 percent this year, from 3.3 percent last year, while imports would see a stronger growth of 4.25 percent, the institute said in a report, after factoring in data from the first two months of this year.
The estimated 2.4 percent annual growth reflects the nation’s inability to shake off sluggishness as it loses weight in global trade, Liang said.
The think tank forecast that the New Taiwan dollar would trade at NT$29.1 against the US dollar this year, stronger than its previous forecast of NT$29.98.
The greenback tends to soften when US budget deficits widen, Liang said.
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