DBS Bank Ltd (星展銀行) has lowered its GDP growth forecast for Taiwan this year to 1.9 percent, down from the 2.2 percent it estimated in December last year, as the economy faces increasing downside risks from the tech sector in the near term.
DBS said it would maintain its economic growth forecast for South Korea at 2.6 percent this year, despite its tech sector also slowing rapidly since the fourth quarter last year.
“Taiwan is more vulnerable than South Korea to the tech slowdown, given its higher exposure to the tech sector and higher reliance on external trade,” Singapore-based DBS economist Ma Tieying (馬鐵英) said in a report on Friday.
Electronics account for more than 40 percent of Taiwan’s total exports, while exports of overall goods and services account for 77 percent of the country’s GDP, DBS said.
In contrast, South Korea has a relatively diversified industrial structure, comprised of not only electronics, which account for one-third of total exports, but also automobiles, vessels and commodities, the lender said.
South Korea’s exports-to-GDP ratio is also relatively low at 55 percent, it said.
With the near-term outlook for the tech sector remaining challenging and a comprehensive rollout of 5G networks likely emerging next year to provide a solid catalyst, while a substantial recovery in Chinese demand would also take time to materialize, DBS said Taiwan faces more headwinds in the coming months.
The bank’s GDP forecast came after the economy grew only 1.76 percent annually in the final quarter of last year, marking the slowest growth in 10 quarters, as exports deteriorated, and domestic consumption and investment also lost steam, the Directorate-General of Budget, Accounting and Statistics (DGBAS) reported on Thursday last week.
The DGBAS cut its GDP growth forecast for last year by 0.06 percentage points to 2.6 percent from its previous forecast, while it retained its forecast of 2.41 percent for this year, although the figure risks a downward revision if headwinds increase, it said.
Faced with growing uncertainty in external trade, “South Korea is better prepared than Taiwan in terms of domestic policy support,” Ma said.
In South Korea, government spending is proposed to increase by 8.5 percent this year and the fiscal deficit ratio is to modestly widen by 0.1 percentage points to 1.8 percent of GDP, as policymakers in Seoul want to step up fiscal efforts to boost the economy, she said.
However, “fiscal consolidation remains on the government’s policy agenda” in Taiwan, Ma said, referring to total expenditure in the government’s general budget for this year rising just 1.6 percent to NT$1.998 trillion from NT$1.967 trillion a year earlier, “which is aimed to bring the fiscal account to a roughly balanced position this year,” she said.
Taiwan’s long-term economic competitiveness will hinge not only on national champions like Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電) but also on the widespread adoption of artificial intelligence (AI) and other emerging technologies, a US-based scholar has said. At a lecture in Taipei on Tuesday, Jeffrey Ding, assistant professor of political science at the George Washington University and author of "Technology and the Rise of Great Powers," argued that historical experience shows that general-purpose technologies (GPTs) — such as electricity, computers and now AI — shape long-term economic advantages through their diffusion across the broader economy. "What really matters is not who pioneers
In a high-security Shenzhen laboratory, Chinese scientists have built what Washington has spent years trying to prevent: a prototype of a machine capable of producing the cutting-edge semiconductor chips that power artificial intelligence (AI), smartphones and weapons central to Western military dominance, Reuters has learned. Completed early this year and undergoing testing, the prototype fills nearly an entire factory floor. It was built by a team of former engineers from Dutch semiconductor giant ASML who reverse-engineered the company’s extreme ultraviolet lithography (EUV) machines, according to two people with knowledge of the project. EUV machines sit at the heart of a technological Cold
TAIWAN VALUE CHAIN: Foxtron is to fully own Luxgen following the transaction and it plans to launch a new electric model, the Foxtron Bria, in Taiwan next year Yulon Motor Co (裕隆汽車) yesterday said that its board of directors approved the disposal of its electric vehicle (EV) unit, Luxgen Motor Co (納智捷汽車), to Foxtron Vehicle Technologies Co (鴻華先進) for NT$787.6 million (US$24.98 million). Foxtron, a half-half joint venture between Yulon affiliate Hua-Chuang Automobile Information Technical Center Co (華創車電) and Hon Hai Precision Industry Co (鴻海精密), expects to wrap up the deal in the first quarter of next year. Foxtron would fully own Luxgen following the transaction, including five car distributing companies, outlets and all employees. The deal is subject to the approval of the Fair Trade Commission, Foxtron said. “Foxtron will be
INFLATION CONSIDERATION: The BOJ governor said that it would ‘keep making appropriate decisions’ and would adjust depending on the economy and prices The Bank of Japan (BOJ) yesterday raised its benchmark interest rate to the highest in 30 years and said more increases are in the pipeline if conditions allow, in a sign of growing conviction that it can attain the stable inflation target it has pursued for more than a decade. Bank of Japan Governor Kazuo Ueda’s policy board increased the rate by 0.2 percentage points to 0.75 percent, in a unanimous decision, the bank said in a statement. The central bank cited the rising likelihood of its economic outlook being realized. The rate change was expected by all 50 economists surveyed by Bloomberg. The
RSS