The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its economic growth forecast for the nation to 5.03 percent, citing a global economic recovery, which it said would boost the nation’s exports and domestic demand.
That represented an increase of 0.73 percentage points from its forecast in January and is the first to forecast growth of more than 5 percent.
The Directorate-General of Budget, Accounting and Statistics in late February forecast that GDP would grow 4.64 percent this year, while the central bank last month projected a 4.53 percent increase.
Despite the uncertainty over the global economy due to the COVID-19 pandemic, the technology sector has not suffered any ill-effects, allowing Taiwanese manufacturing activity to expand, TIER said.
The upgraded economic growth forecast was based on rising domestic demand and exports in Taiwan, TIER president Chang Chien-yi (張建一) told reporters.
If the global economy continues to recover, TIER might consider raising its forecast for Taiwan again, he said.
TIER forecasts that the Taiwanese economy would post quarterly growth of 6.01 percent, 7.35 percent, 3.64 percent and 3.43 percent.
The higher GDP growth forecast for this year also reflects a relatively low baseline last year due to the COVID-19 pandemic, said Gordon Sun (孫明德), director of TIER’s Economic Forecasting Center.
Other major factors include contract chipmaker Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) massive investment plans and robust demand for emerging technologies, such as 5G applications in the information and communications technology industry.
TSMC, the world’s largest contract chipmaker, last week said that it plans to spend US$30 billion of its capital expenditure to expand production capacity and upgrade its technologies to maintain its lead over its competitors.
Taiwan’s private investment is expected to grow 5.02 percent this year, while capital formation would increase by 4.43 percent, TIER said, raising its growth forecasts from 4.83 percent and 4.14 percent respectively.
Telecoms are also working to build their 5G networks, while many companies are investing in the nation’s offshore wind and solar energy development projects, TIER said.
Private consumption is expected to increase 4.35 percent this year, TIER said, raising its forecast by 0.22 percentage points, on the back of a thriving manufacturing sector and a booming equity market.
The think tank also hiked it growth forecast for Taiwan’s exports of merchandise and services, from 4.87 percent to 5.64 percent, and for imports, from 4.47 percent to 4.87 percent.
It raised its projection for growth in the consumer price index, from 1 percent to 1.3 percent, saying that while global raw material prices are on the rise, it remains to be seen whether the world economy would face inflationary pressure.
Meanwhile, business sentiment in the local manufacturing sector weakened slightly last month, with the composite index for the manufacturing sector dropping 0.39 from the previous month to 105.73.
The composite index for the property industry fell 2.68 from February to 106.6 last month, while the index for the service sector rose 1.25 to 100.96, TIER said.
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