The economy may grow by less than 2 percent for a second consecutive year after the Directorate-General of Budget, Accounting and Statistics (DGBAS) yesterday cut its GDP growth forecast for this year to 1.74 percent.
The agency’s latest forecast is 0.57 percentage points lower than the forecast of 2.31 percent it made in August and is the lowest among domestic economic institutes.
“Current economic sentiment in Taiwan is quite sluggish and it lacks a major growth driver,” DGBAS statistics division director Tsai Hung-kun (蔡鴻坤) told a press conference.
Worse-than-expected economic performance in the fourth quarter, mainly due to deteriorating exports, was the major factor that led the DGBAS to revise downward its full-year GDP growth forecast.
Exports in the fourth quarter may slow to US$75.9 billion, a decrease of 2.03 percent from the same period last year, which means full-year exports would only rise by 0.44 percent from last year to US$302.5 billion, the agency said in its quarterly report.
This led to the DGBAS forecasting 1.22 percent year-on-year expansion for the economy in the fourth quarter, down from the 2.61 percent forecast it made in August. That would also make for the slowest GDP quarterly growth since the second quarter last year.
DGBAS section chief Joshua Gau (高志祥) expressed concern that the headwinds facing the export sector may become a long-term issue, as China starts to manufacture more products locally, boosting domestic supply and dragging down demand for Taiwanese goods.
In addition, newly added production in the local manufacturing sector has shown a significant decline over the past few years as Taiwan plays a less important role in the global supply chain for electronics products, Gau said.
Private investment is expected to expand 5.32 percent from a year ago, the report showed.
However, “other than the semiconductor sector, other Taiwanese industries still lack investment momentum,” Directorate-General of Budget, Accounting and Statistics Minister Shih Su-mei (石素梅) said.
Private consumption is expected to increase 1.46 percent this year, the report showed.
The agency also cut its forecast for economic growth next year to 2.59 percent from the 3.37 percent it had previously forecast, with exports, private consumption and private investment expected to rise 3.07 percent, 1.72 percent and 4.37 percent from this year respectively.
The DGBAS said that boosting private consumption would be a challenge because of a limited increase in average salary.
Inflation could surge 1.21 percent annually next year, following a mild 0.94 percent increase this year, the report said.