The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday cut its forecast for Taiwan’s GDP growth this year to 2.58 percent, down 0.33 percentage points from its previous projection, saying that global inflation and monetary tightening would slow foreign trade and private investment.
High inflation would affect the global economy, curtailing demand for goods and services, which would have a negative impact on Taiwan’s exports, TIER president Chang Chien-yi (張建一) said.
Tech and non-tech firms would struggle to digest a glut of inventory in the first half of this year, and it remains to be seen whether demand will recover afterward, Chang said, adding that the global economic landscape looks murky in light of the Ukraine war and other uncertainties.
Photo courtesy of the Taiwan Institute of Economic Research
Exports are expected to increase 1.13 percent this year, while imports would grow 1.25 percent — a downward revision of 1.22 percentage points and 0.54 percentage points respectively, the think tank said.
US technology titans Google, Microsoft Corp, Amazon.com Inc and other companies have laid off more than 70,000 employees, as digital advertisers are spending less and rising inflation is curbing consumer expenditure.
TIER said that private consumption would support Taiwan’s economy this year, as it is expected to increase 5.95 percent, up 1.63 percentage points from its prediction in November last year.
Relaxed COVID-19 restrictions have been fueling a quick recovery for service-oriented businesses, especially in the hospitality and tourism sectors, the institute said.
Private investment would lend limited support to domestic demand, and is expected to increase 2.3 percent from last year, as inventory corrections appear bigger and are lasting longer than expected, prompting firms to become conservative about capital spending, it said.
However, business confidence among local manufacturers rose 0.81 points last month to 85.16, TIER found in a separate survey.
TIER Macroeconomic Forecasting Center director Gordon Sun (孫明德) attributed the uptick to China ditching its “zero COVID” policy, saying it would speed up the recovery in economic activity, despite soaring COVID-19 cases in the short term.
That explains why local suppliers of petrochemical, plastic steel, and machinery products are expecting business to improve in the coming six months and some have benefited from rush orders, Sun said.
Chang said he was concerned that rush orders might not continue, adding that more observation is needed before forecasting a trend.
As for the tech sector, a turnaround might not take place until the second quarter of this year, he said.
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