The Yuanta-Polaris Research Institute (元大寶華綜經院) yesterday slightly raised its forecast for the nation’s GDP growth this year on stronger exports, but foresaw downside risks gathering steam amid escalating tariff rows abroad and unfavorable policy fallout at home.
The Taipei-based think tank expects the economy to increase 2.6 percent this year, higher than the 2.55 percent it predicted three months ago, as major bellwethers fared stronger, institute president Liang Kuo-yuan (梁國源) said.
“The global economy remains in a cyclical upswing, but with risks increasingly tilted to the downside,” Liang told a news conference in Taipei.
Headwinds are gaining force due mainly to the US-China trade war and might weigh on Taiwan’s economy, which relies heavily on exports of electronic components used in smartphones, laptops and other applications sold in the US and China, he aid.
The two markets accounted for 53.3 percent of Taiwan’s outbound shipments last month, Ministry of Finance statistics showed.
Tariffs imposed by the US and China on bilateral exports might cut demand for their products and slow global trade as a whole, Liang said, adding that either scenario is unfavorable for Taiwan.
The business sentiment gauge among local manufacturers last month shed 3.3 points to a 13-month low of 98.16, as firms turned cautious about their outlook, the Taiwan Institute of Economic Research (TIER, 台灣經濟研院) found in a monthly survey released on Tuesday.
The declining sentiment came despite the arrival of the high sales season for technology products, suggesting that the trade war is affecting seasonality, TIER economist Gordon Sun (孫明德) said.
However, local exporters might benefit from the trade war if global technology brands shift orders from China to Taiwan to avoid extra tariffs, Liang said.
Firms involved in supplying base metal products, printed circuit boards and electronic parts might emerge as the biggest beneficiaries, as their markets heavily overlap with their Chinese peers, Yuanta-Polaris said.
Overall, trade barriers cast a shadow on global trade flows, Liang said.
Domestically, private consumption is taking a hit from pension reforms as evidenced by a slowdown in annual retail sales growth to 0.6 percent last month, compared with a 4.6 percent increase in the second quarter, Liang said.
Pension reforms might dampen private consumption by 0.6 percent this year and by 0.76 percent next year, Yuanta-Polaris’ research showed.
Meanwhile, Beijing might impose restrictions on the number of Chinese tourists allowed to travel to Taiwan and on Taiwanese business activity in China, Liang said.
Investments by Taiwanese in China account for more than 30 percent of its GDP, making Taiwan vulnerable to unfavorable policy restrictions, he said.
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