The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday lowered its forecast for Taiwan’s GDP growth this year to 1.03 percent, less than half of its previous projection of 2.34 percent, as the COVID-19 pandemic is hurting exports and consumer spending.
The Taipei-based institute lent support to the government’s belief that Taiwan would manage to grow GDP for the whole of the year, although Standard & Poor’s Global Ratings (S&P) expects the nation to see a 1.2 percent contraction.
“Economic activity is chilling on both domestic and external fronts due to global lockdowns to contain the pandemic,” CIER president Chen Shi-kuan (陳思寬) said.
A mild spread — with 395 confirmed cases so far — has enabled Taiwan to avoid instituting strict isolation measures to fight the novel coronavirus, which has brought economies in Europe, the US and other countries to a virtual standstill.
Nevertheless, the nation is not immune to reduced trade and people flows, or to a potential nosedive in business and consumer confidence, CIER economist Peng Su-ling (彭素玲) said.
The manufacturing and service industries hold bleak views about their business prospects, although exports staged a stronger performance than the government expected, thanks to robust demand for electronics used for 5G deployment and artificial intelligence, Peng said.
Taiwan is home to the world’s leading suppliers of semiconductors, the mainstay of outbound shipments, the economist said.
Taiwan Semiconductor Manufacturing Co (台積電) on Thursday told investors that demand for advanced technologies would hold strong in the coming years.
Exports might pick up 2 percent this year, while imports increase 1.4 percent, assuming that the virus shock is plateauing this month and the world would return to normalcy next quarter, Peng said.
Still, Taiwan’s economy would see a small and temporary decline of 0.12 percent in the current quarter, dragged by sluggish consumer spending and private investment, as well as cheaper wholesale and fuel prices, CIER said.
Private consumption would make a nearly zero contribution to GDP this year, it said, as the number of furloughed employees soared to 14,821 this week, the highest in eight years.
S&P was less optimistic, forecasting that economies in the region would enter a transition period when social distancing measures would be common between full lockdowns and business as usual until the middle of next year.
Job losses would be a sticky issue and much higher in the absence of government measures directly targeting the retention of jobs, the ratings agency said.
Intense uncertainty renders economic projections extremely difficult at this stage, CIER and S&P said.
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