The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday held its economic growth forecast for this year almost unchanged, but slashed its trade volume prediction as the specter of a US-China trade war looms larger.
“While the economy remains on a course of expansion, the pace might slow going forward, due to growing noises and a high comparison base,” CIER researcher Peng Su-ling (彭素玲) said after the Taipei-based think tank forecast that the nation’s economy would increase 2.48 percent this year.
The institute in April predicted that Taiwan’s GDP would increase 2.47 percent year-on-year.
The pickup might lose some steam as the US and China threaten more tariffs on each others’ imports and inventory adjustment pressure builds for local firms, Peng said.
Exports, which constitute 70 percent of GDP, might increase only 3.26 percent this year, compared with an earlier estimate of 4.11 percent, while import growth might ease from 4.23 percent to 3.4 percent, the institute said.
Protectionism is unfavorable for Taiwan, as China accounts for 40 percent of the nation’s outbound shipments and the US 11 percent, government data showed.
Local firms have started preparing inventory for next-generation mobile devices, but the momentum is not as strong as in the past, CIER economist Chen Shin-hui (陳馨蕙) said.
“The launch of a new iPhone series used to bolster local firms in the supply chain and Taiwan’s economy as a whole, but the effect might not be evident this year,” said Chen, who helps compile the official purchasing managers’ index.
Growing market competition has also weighed on profit margins and some local firms have had no choice but to transform and tap other sources of income, Chen said.
CIER forecast that domestic demand, particularly private investment, would uphold the economy in the second half of this year, as pension reforms prompt civil servants, public-school teachers and military personnel to tighten spending.
Private investment was forecast to grow 2.5 percent annually this year, compared with a previous estimate of 2.24 percent growth, while consumer spending would gain 1.95 percent, the same as the last projection, CIER said.
Consumer price inflation is expected to rise to 1.65 percent this year on the back of rising fuel and raw material costs, while the New Taiwan dollar was forecast to trade at an average of NT$29.75 against the US dollar, the institute said.
Lin Tsung-yao (林宗耀), director-general of the central bank’s Department of Economic Research, voiced reservations, saying that the NT dollar has mostly ended weaker than NT$30.5 this month.
Yuanta-Polaris Research Institute (元大寶華綜經院) president Liang Kuo-yuan (梁國源) said the global economy is likely approaching a plateau, with the chance of a turnaround increasing.
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