The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday kept its forecast for the nation’s GDP growth this year unchanged at 2.12 percent, with exports weakening, but the possibility that private investment might be stronger than expected.
Exports were soft with a 4.2 percent contraction in the first quarter, reflecting a slowdown in global trade flows, TIER president Chang Chien-yi (張建一) said.
However, the Taipei-based think tank left its forecast intact on expectations that the recovery of private investment would accelerate in light of capital equipment purchases by local semiconductor firms, Chang said.
Imports of capital equipment, a critical gauge of corporate expansion or upgrade needs, jumped 15.4 percent in the January-to-March period, with semiconductor equipment surging 41.2 percent, Ministry of Finance data showed.
Taiwan is home to the world’s largest chip makers, designers and packagers of related shipments, with the industry driving 25 percent of overall exports.
The aggressive equipment acquisitions suggest that local firms are upbeat about business in the second half, a trend that might receive further support from stimulus measures to encourage capital repatriation and facility relocations, Chang said.
So far, the Ministry of Economic Affairs has approved 35 applications valued at NT$137 billion (US$4.43 billion) to move manufacturing facilities to Taiwan from China to avoid heavy tariffs imposed by Washington on Chinese exports, TIER said.
The relocation wave has prompted the think tank to raise its projection of capital formation increase for this year to 5.36 percent, from a prediction in January of 4.6 percent, it said.
Private consumption might improve at a pace of 2.3 percent, up from a prediction of 2.2 percent in January, with people expected to be more comfortable spending following rallies across global bourses as the US and China negotiate an end to the tariff dispute, the institute said.
The TAIEX gained 2.42 percent last month, with daily turnover rising to NT$113.51 billion, it said, adding that companies in other sectors also gained more confidence.
The sentiment reading for the manufacturing industry increased 4.7 points to 95.93, while the index for the service industry rose 5.51 points to 91.25, it said, citing a monthly poll.
Firms involved in construction and property brokerage bucked the trend, turning less confident, with the sentiment gauge shedding 2.95 points to 94.13.
Pricing differences continued to weigh on property transactions, while political factors ahead of next year’s presidential election deepened uncertainty, TIER said.
Slower GDP growth in China, Europe and the US poses the biggest downside risk for Taiwan’s economy, as these trade partners account for 65 percent of the nation’s total exports, TIER economist Gordon Sun (孫明德) said.
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