GDP forecast rises on growing exports

WORTHWHILE TRADE-OFF::The relocation of high-end production lines to Taiwan has lowered the contribution from intermediary trade, but has boosted direct exports

By Crystal Hsu  /  Staff reporter

Sat, Aug 17, 2019 - Page 12

The Directorate-General of Budget, Accounting and Statistics (DGBAS) yesterday raised its forecast for GDP growth this year to 2.46 percent, ending three downward revisions, as exports fared better than expected and could gain momentum in the rest of this year.

That was an improvement of 0.27 percentage points from the 2.19 percent it forecast in May, even though international research bodies trimmed global trade volume projections amid growing uncertainty.

“Global scenes look increasingly fluid and unfavorable, but economic data at home point to steady growth, thanks to benefits from order transfers and homeward relocation of overseas production capacity,” DGBAS Minister Chu Tzer-ming (朱澤民) told a news conference.

Several Taiwanese firms have moved high-end production lines back from China to Taiwan, with more planning to follow suit to avoid the effects of a US-China trade dispute, he said.

That has attenuated the contribution from intermediary trade to Taiwan’s economy, but has boosted direct exports, allowing the nation to reap higher added value in the supply chain, he added.

Intermediary trade yielded US$7.02 billion in gross profit in the first six months and is unlikely to catch up with the US$18.3 billion for the whole of last year, Chu said, adding that it translated into thin average profit of 4 percent.

Local manufacturing would mean more investment and job opportunities, and drive up demand for factory and office space, he said.

External demand — including goods and services — last quarter grew 4.13 percent and might advance 3.47 percent for the entire year, up 0.85 percentage points from the previous forecast, DGBAS official Tsai Yu-tai (蔡鈺泰) said.

A decline in commodity exports would narrow to 0.09 percent this quarter and swing to growth of 1.69 percent next quarter, the agency said in a report.

Private investment would become the main growth driver with an expected increase of 5.01 percent this year, up 0.53 percentage points from the previous estimate, it said.

While the government has processed more than 100 capital repatriation applications with a total investment value of more than NT$500 billion (US$15.9 billion), Tsai said that only NT$110 billion would have effect this year, so the agency added only 0.2 percentage points to its growth update.

“It will take some time for firms to import machinery equipment from abroad,” Tsai said.

Meanwhile, local technology firms such as Taiwan Semiconductor Manufacturing Co (台積電) have spent huge sums buying new capital equipment to maintain technology leadership and expand capacity, he said.

Apart from that, domestic demand has little else to boast about, as the agency forecast that private consumption would increase 2.03 percent, up just 0.01 percentage points, as volatile financial markets have shaken investment confidence.