The Directorate-General of Budget, Accounting and Statistics (DGBAS) yesterday cut its forecast for Taiwan’s GDP growth this year to 2.19 percent, from a 2.27 percent estimate in February, as exports proved weaker last quarter and private consumption failed to lend support.
Poor economic data warranted the downward revision after the decline in exports turned out to be deeper than expected, DGBAS Minister Chu Tzer-ming (朱澤民) told a news conference.
The nation’s export-reliant economy expanded 1.71 percent year-on-year in the first quarter, slower than the 1.72 percent annual increase the agency reported on April 30.
Exports, equivalent to 60 percent of domestic GDP, are now expected to remain in the negative for the entire year, rather than eking out fractional growth, after Washington on May 10 raised tariffs on an additional US$20 billion of Chinese goods, the agency said in a report.
“The forecast has not factored in pending tariffs valued at US$325 billion or the US’ ban on Huawei Technologies Co (華為),” Chu said.
Taiwan is home to major technology companies with deep participation in the global supply chains for smartphones, laptops and other consumer electronics.
The agency declined to comment on whether the slowdown has hit bottom, saying that the situation last month showed signs of improvement, but uncertainty flared up again this month.
International research institutes have trimmed projections for global GDP and trade growth, leaving a less favorable situation for Taiwan, Chu said.
External demand eroded GDP growth by 0.01 percentage points in the January-to-March period, the report said.
Although private consumption posted a 1.32 percent gain, it missed the February forecast by 0.47 percentage points, he said.
Sales of cars and smartphones disappointed, while daily stock turnover tumbled 23.76 percent from a year earlier, meaning lackluster brokerage fees, the report said.
A US-China trade war is driving investors to the sidelines, as evidenced by the fast flight of foreign funds from the local bourse, it said.
Foreign institutional investors have this month slashed NT$118.23 billion (US$3.75 billion) in local holdings, Taiwan Stock Exchange data showed.
However, there is a silver lining from the trade war, as some Taiwanese firms in China have been moving production back to Taiwan, significantly boosting private investment, Chu said.
The GDP component last quarter rose 6.45 percent, thanks to active purchases of capital equipment by local semiconductor firms, he said.
More than 55 companies have filed plans to relocate manufacturing facilities from China, which would bring home investment totaling more than NT$310 billion, DGBAS official Jasmine Mei (梅家瑗) said, adding that the trend has helped ease the pain of the trade war.
As a result, the agency raised its forecast for capital formation by 0.39 percentage points to an increase of 5.39 percent this year, aided by expenditure by the government and public enterprises.