The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday raised its economic growth forecast for this year on the back of stronger exports, but slashed its GDP projection for next year when it expects US-China trade tensions would start to bite.
The economy is forecast to expand 2.61 percent this year, up from the 2.48 percent the Taipei-based institute estimated in July, as some local firms benefitted from order transfers after the US imposed higher tariffs on Chinese products, CIER acting president Wang Jiann-chyuan (王健全) said.
Local suppliers of steel products have reported better sales after their Chinese rivals were hit by US tariffs.
However, “a protracted trade war would deal a blow to the world’s technology supply chain and the nation’s export-reliant economy,” Wang told reporters, adding that the impact would be more evident in the first half of next year.
Taiwan is a major global supplier of chips, chip design, camera lenses, touch panels and other critical components used in smartphones, laptops and other consumer electronics devices.
Electronics shipments account for more than 30 percent of exports.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, on Thursday lowered its revenue growth target for the third time this year, citing sagging demand from China for cryptocurrency mining tools.
China is Taiwan’s largest trading partner, accounting for 40 percent of outbound shipments.
CIER therefore expects GDP growth next year to slow to 2.18 percent, from its prior forecast of 2.23 percent.
For this year, robust exports, which is forecast to grow 8.25 percent from 7.69 percent, underpinned the upward revision since the institute has mixed views on the domestic front.
Private consumption is forecast to advance faster, from 1.95 percent to 2.31 percent, but private investment could decelerate, from 2.5 percent to 1.56 percent, it said.
Nanya Technology Corp (南亞科技) on Tuesday said that it would reduce capital spending by 12.5 percent for this year, as the US-China tariff row and PC processor supply constraints weigh on demand.
Several surveys showed that companies by and large have turned cautious about their outlook, despite the advent of the high sales season in the West.
The order shift from China might continue this year, as China-based Taiwanese firms consider moving their manufacturing facilities elsewhere, including to Taiwan, Wang said.
CIER expects the New Taiwan dollar to trade at an average of NT$30.18 against the US dollar this year and soften a bit to NT$30.41 next year.
The TAIEX’s plunge reflects weak investor confidence consistent with capital outflows, Wang said, adding that the government should have stimulus measures in place to shore up domestic demand.
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