The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday cut its forecast for GDP growth this year to 3.28 percent from 3.56 percent, and expects the pace to slow further to 2.81 percent next year as downside risks heighten at home and abroad.
The Taipei-based institute blamed the downward revisions on stubbornly high global inflation and drastic monetary tightening that weakened demand for Taiwanese exports.
“Despite the slowdown, Taiwan should register GDP growth of 3 percent for four straight years, which is pretty good,” CIER president Chang Chuang-chang (張傳章) said.
Photo: Huang Tzu-hsun, Taipei Times
Fewer exports left private consumption to uphold the economy, with a 3.31 percent increase annually, reversing two previous years of downturns induced by the COVID-19 pandemic and disease control measures, Chang said.
Local firms are taking a hard hit from inventory gluts that are expected to persist through the first half of next year, the institute said.
However, exports should grow 11.38 percent annually this year, given solid demand in the first half of the year, CIER researcher Peng Su-ling (彭素玲) said.
The rate is forecast to decline to 2.28 percent next year, as central banks in advanced economies need more time to bring inflation under control, Peng said.
As a result, Taiwan’s trade data is likely to worsen quarter by quarter, Peng said, adding that it is unknown whether GDP growth next year can surpass 3 percent, as the central bank and the Directorate-General of Budget, Accounting and Statistics (DGBAS) have forecast.
DGBAS Minister Chu Tzer-ming (朱澤民) told lawmakers yesterday that the agency would likely need to trim this year’s growth forecast due to disappointing exports.
Listless demand and inventory digestion merit growth corrections, Chu said, adding that the economy this year could have difficulty expanding faster than 3.5 percent.
CIER said it does not think that consumer prices would drop below 2 percent next year, given Taiwan’s dependence on imported energy sources and the local currency’s steep depreciation.
The US dollar has not yet plateaued, and capital outflows are to continue, as portfolio managers re-evaluate asset prices in line with calculations, including interest spread, Chang said.
A weak New Taiwan dollar is favorable for exports, but would intensify imported inflation and capital outflows, he said.
The US dollar has benefited from economic woes, as investors traditionally take shelter in the currency during tumultuous times, National Tsing Hua University professor emeritus Liang Kuo-yuan (梁國源) said.
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