Taiwan’s economy is back on track for meaningful growth next year, as exports appear set for a healthy recovery, aided by stronger activity in the tech sector despite an expected slowdown in the US and China, Taiwan Ratings Corp (中華信評) said on Thursday.
The recovery would come after several quarters of inventory adjustments for consumer electronic devices induced by sharp global inflation and monetary tightening.
“We expect Taiwan’s economic growth to be 3 percent in 2024, from 1.2 percent in 2023,” Taiwan Ratings credit analyst Lan Yu-han (藍于涵) told a press briefing in Taipei.
Photo: CNA
However, the still-sluggish global trade and subdued growth in China could constrain upside potential, particularly for commodity sectors, Lan said.
A pickup in consumer demand for technological devices and broader penetration of electric vehicles, renewable energy and artificial intelligence would lend support to GDP growth next year, she said.
Major tech firms recently offered positive business guidance for this quarter and beyond, but would maintain a cautious approach to cope with lingering uncertainty, Lan said.
Private consumption is likely to moderate over the coming year, due partly to a high base this year and expectations that the bonus from revenge consumption would lose momentum, she said.
Furthermore, Taiwanese would practice caution and slow discretionary spending in light of high prices for goods and services, she said, adding that corporate investment would remain subdued, in line with the listless global economy.
“While the worst is over for Taiwan’s export-dependent economy, we still see several global macroeconomic obstacles in the way of a more rapid growth trajectory,” Lan said.
The risks include the restructuring of global supply chains, the high interest rate environment, and geopolitical tensions, which could weigh on corporate capital expenditure plans over the next few quarters, she said.
In addition, the growth momentum of the US and China would also weigh on Taiwan's economy going forward as the two countries account for more than 50 percent of Taiwan’s outbound shipments, Taiwan Ratings said.
The US Federal Reserve on Wednesday cut its forecast of US GDP growth for next year while raising estimates for the unemployment rate. The Fed thus kept its policy rate unchanged and hinted at rate cuts next year in the absence of a recession.
China — Taiwan’s largest export destination — is being hit by deflation and capital outflows as post-COVID-19 pandemic recovery has proved weaker than expected. Its property sector poses another challenge following years of overexpansion.
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