Another research institute yesterday raised its forecast for Taiwan’s economic growth this year, as more companies return home from China amid the US-China trade feud, driving up private investment and cushioning the blow from soft external demand.
Yuanta-Polaris Research Institute (元大寶華綜經院) revised up its GDP growth forecast for this year to 2.3 percent from the 2.1 percent it predicted six months earlier, as China-based companies shift production bases back home at a faster pace and a greater scale.
“The supply chain realignment has made Taiwan less of a victim of the ongoing trade dispute and cut its economic dependence on China, although the link remains strong,” the Taipei-based think tank’s president Liang Kuo-yuan (梁國源) said.
Photo: CNA
A government-backed survey late last year found that 45.8 percent of Taiwanese firms in China said they intend to adjust their investments or relocate, Liang said.
That ratio rose to 49.6 percent in the first half of this year, he added.
Nearly 19 percent would move back to Taiwan, while 22 percent favor Southeast Asia, mainly Vietnam, as a relocation destination, he said, citing government data.
The figure should climb further as the US and China are scheduled to impose additional tariffs, with no sign of a resolution in sight, Liang said.
Against this backdrop, Yuanta-Polaris now expects private investment to expand 5.05 percent, from a previous estimate of 3.67 percent.
Government incentives have helped foster investment at home, and the nation has benefited from Chinese firms cutting reliance on US suppliers and shifting orders to Taiwanese firms, Liang said.
Exports to the US soared to a record 19 percent of outbound shipments in the first eight months of the year, but shipments to China still accounted for the bulk at 40 percent, making Taiwan vulnerable to a slowdown in China, which would become more evident next year, he said.
The Taiwanese economy would remain resilient next year, but with growth easing to 2.2 percent, as similar downside risks linger, Liang said.
Low inflation and interest rates, stemming from protracted monetary easing, have squeezed room for returns and contributed to a stagnant economy, he said.
“Domestic companies are generally cautious about business prospects as several surveys have shown,” Liang said.
A monthly survey released yesterday by the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) shared similar observations.
The manufacturing industry’s sentiment gauge came in at 96.14 last month, up 1.16 points from one month earlier, although more companies were negative about the business outlook and fewer firms were upbeat, the TIER report showed.
The service sector shed 1.46 points to 91.16, as stock brokers, banks retailers and logistics operators fared weaker, it said.
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