The Taiwan Research Institute (TRI, 台灣綜合研究院) yesterday cut its forecast for GDP growth this year from 2.51 percent to 1.45 percent, as high inflation and monetary tightening around the world create an unfavorable environment for exports and private investment.
The effects of monetary tightening by major central banks has grown more evident this year and would persist, in light of weak corporate sentiment around the world, TRI president Wu Tsai-yi (吳再益) told an economic forum in Taipei.
Global inflationary pressures, while showing signs of cooling, need time to return to the 2 percent target, meaning that major central banks might again raise interest rates to curb demand for goods and services, Wu said.
Photo: Huang Chia-ling, Taipei Times
Spreading geopolitical tension, especially between China and the US, are worsening an already fragile macroenvironment, as the world’s two largest economies account for more than 50 percent of Taiwan’s outbound shipments, he said.
That backdrop, coupled with disappointing economic data thus far, merited downward growth revisions, he said.
TRI’s growth update is the most conservative and came after the central bank last week trimmed its projection from 2.21 percent to 1.72 percent, citing similar concerns.
The New Taipei City-based think tank said it expects exports of goods and services to contract 1.31 percent this year, while imports might squeeze a fractional 0.05 percent growth.
Private investment, a primary growth driver in previous years, might shrink 2.76 percent, as firms postpone or call off investment plans to cope with poor business and order cancelations, the institute said.
Private consumption would unilaterally bolster the economy with a 5.89 percent increase projected for this year, thanks in part to a low basis of comparison last year, when COVID-19 infections kept people home, it said.
However, Wu raised doubts over the health of private consumption, saying that it received a one-off boost from a rebate of NT$6,000 per person in the past few months, while inflation weakens the benefits of increased wages.
Recent drops in electricity use by industrial and commercial users confirmed its downbeat view, TRI said.
Consumption of high-voltage electricity last month fell 3.94 percent from a year earlier, declining for the eighth consecutive month, it said.
In particular, electricity use has slipped into contraction zone for local suppliers of chemical and plastic products for 18 months without signs of improvement, it said.
The decline is narrowing for base metal product makers, indicating a recovery might be around the corner, it added.
Energy consumption by semiconductor firms has also slowed in the past few months after aggressive gains in previous years, it said.
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