Chip troubles to hit GDP: ANZ

By Crystal Hsu  /  Staff reporter

Wed, Sep 11, 2019 - Page 12

Headwinds arising from a downturn in the semiconductor segment are to weigh on Taiwan’s economic performance, with GDP growth forecast to ease to 1.5 percent next year from an expected 2.1 percent this year, Australian and New Zealand Banking Group (ANZ) said yesterday.

The global semiconductor market this year is expected to decline 13.3 percent to US$406.6 billion, from a 13.7 percent expansion last year to an all-time high of US$468.8 billion, according to World Semiconductor Trade Statistics.

The trend means that domestic corporate earnings would come under pressure, while capital expenditure would remain below the historical trend, ANZ economists Bansi Madhavani and Raymond Yeung (楊宇霆) said.

“A weak semiconductor segment will keep growth impulses subdued next year, with GDP growth moderating to 1.5 percent and recovering to 2 percent in 2021,” they said in a report.

The nation is home to the world’s largest suppliers of chips used in smartphones, game consoles, laptops and 5G applications.

Semiconductor exports accounted for 32.3 percent of overall shipments last month, the Ministry of Finance said on Monday.

The pinch of US tariff hikes on smartphones and personal computers would be more evident next year after they take effect on Dec. 15, ANZ said.

In the context of US-China trade dispute, Taiwan is well placed to benefit from potential supply chain alignments, the banking group said, adding that more companies are moving out of China and expanding their footholds in Taiwan.

The government’s “Invest Taiwan” campaign as of Thursday last week saw more than NT$576 billion (US$18.44 million) in investment pledges by returning Taiwanese firms, supporting the nation’s export outlook for the second half of this year, it said.

However, this should not be read as an overall business improvement, as it is merely the effect of rerouting production bases, ANZ added.

GDP growth could improve going into 2021 if external demand conditions stabilize, aided by robust investments, it said.

The inflation rate would ease to 0.6 percent next year before inching up to 0.9 percent in 2021, it added.

In light of a weak growth impetus, a moderate inflation outlook and uncertain global trade conditions, the central bank is to keep the policy rate unchanged at 1.375 percent through 2021, ANZ said.

The central bank is due to review policy rates in its quarterly board meeting on Thursday next week.