Taiwan’s economy might expand 2.2 percent next year, slowing from an estimated 2.53 percent this year, as the US-China trade dispute might weigh on exports, but private investment could rise if the government helps foster capital repatriation, the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) said yesterday.
The expectation of a slowdown is in line with the global economic trend, as a solution to the trade war remains evasive, the Taipei-based think tank said.
“We do not see evident growth drivers for next year,” TIER economist Gordon Sun (孫明德) told a media briefing in Taipei.
Exports, which account for 70 percent of GDP, are unlikely to put up a strong performance as they did this year, with the world’s two largest economies locked in a trade stalemate, Sun said.
TIER said it expects outbound shipments of goods and services to grow 3.55 percent while imports might advance 3.98 percent, representing little or no change from 3.92 percent and 3.98 percent this year respectively.
Taiwan is home to the world’s largest contract chipmakers, chip designers and suppliers of camera lenses and other critical components used in smartphones, personal computers, and the Internet of Things and artificial intelligence applications.
TIER voiced concern that lackluster exports and ongoing capital flight from emerging markets, including Taiwan, would have spillover effects on domestic demand.
Consumers might refrain from spending next year as the local bourse can no longer generate a “wealth effect” after falling below 10,000 points and has yet to show signs of stabilization, Sun said.
Private consumption is expected to increase 2.2 percent, slightly lower than a 2.26 percent pickup projected for this year, the institute said.
Despite the slowdown, the central bank might raise interest rates in the first quarter of next year to help stem capital outflows, TIER president Lin Chien-fu (林建甫) said.
The US Federal Reserve is widely expected to raise interest rats again next month and high-yield bonds would attract further global capital to the US, contributing to volatility across global financial markets, Lin said.
The New Taiwan dollar might weaken to an average of NT$30.6 against the US dollar, from NT$30.13 this year, TIER said.
However, the US-China trade dispute is not entirely harmful, as it presents an opportunity for capital repatriation, Sun said.
Taiwanese firms based in China could shift manufacturing facilities home if the government can help solve labor and land shortages, and guarantee a stable electricity and water supply, he said.
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