Disappointing export figures have prompted the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) to cut its economic growth forecast for the nation for this year to 1.6 percent from its previous estimate of 2.01 percent made in April.
“Taiwan’s economy will have difficulty growing 2 percent this year due to poor exports,” CIER president Yeh Chun-hsien (葉俊顯) told a news conference in Taipei yesterday.
Exports, the main growth driver of the local economy, have contracted for the past 10 months on an annual basis without any sign of recovery in the near future, the Ministry of Finance said earlier this month.
Photo: Ritchie B. Tongo / EPA-EFE
The Taipei-based think tank predicted that exports would shrink 7.13 percent from a year earlier this year, while imports would decrease by 9.97 percent.
Private investment, another major GDP component, would also prove a drag, with a 1.36 percent annual decline estimated for this year, as firms practice frugality and shun investment to mitigate the pain of sluggish business, Yeh said.
As a result, private consumption and government expenditures would become the major forces bolstering the nation’s economy, he said.
Faltering global demand for Taiwan-made goods and inventory destocking by firms have led several research institutions including CIER to downgrade the nation’s GDP growth forecast for this year to below 2 percent.
The Directorate-General of Budget, Accounting and Statistics could join the trend of downward revisions when it updates its growth forecast next month, after predicting 2.04 percent growth in May.
Chu Jung (儲蓉), a risk control chief at Farglory Life Insurance Co (遠雄人壽) and a business management professor, is more pessimistic, warning that Taiwan might struggle to eke out 1 percent GDP growth in light of weak economic data.
Poor exports have historically had a negative impact on domestic demand.
National Central University economics professor Yau Ruey (姚睿) shared the cautious sentiment, saying there is a limit to the growth momentum in private consumption.
It remains to be seen how long revenge consumption will be sustained if exports continue to suffer, analysts have said.
China is a key market for Taiwan’s exports and the economic slowdown in China poses a challenge, which has accounted for Taiwan’s declining reliance on the Chinese market, Yau said.
CIER expects consumer prices to grow 2.1 percent this year, slightly higher than the central bank’s 2 percent target. The job market would hold resilient with an unemployment rate of 3.59 percent, the institute said.
The think tank said Taiwan’s economy could grow 0.48 percent in the second quarter and 2.41 percent in the third before rebounding to 6.11 percent in the fourth quarter, as inventory adjustments are expected to come to an end while demand for artificial intelligence products is rising.
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