Taiwan’s GDP might grow 3.2 percent next year following 4.2 percent growth this year, on the back of strong export growth, but possibly tempered due to less friendly trade terms following US president-elect Donald Trump’s return to power in January, Switzerland-based UBS Group said yesterday.
“We project Taiwan’s growth to accelerate to 4.2 percent in 2024, the strongest since 2022,” helped by artificial intelligence (AI)-driven exports, which has a positive spillover to domestic investment activity, said William Deng (鄧維慎), an economist on Asia and China at UBS Investment Bank.
Taiwan has seen a wave of robust growth, with GDP rising 5.1 percent in the first three quarters of this year and is one of the best performers in Asia, he said.
Photo: Chiang Ying-ying, AP
Local tech firms make chips, servers, storage and memory devices used in cloud-based data centers and AI applications.
Capital formation has spiked above 8 percent, while private consumption has received support from strong corporate income and rosy wealth expectations amid stock market and housing market rallies, Deng said.
However, export growth could moderate next year due to a higher comparison base this year, although the momentum of AI-driven tech exports would remain sustained in the coming quarters, he added.
Non-tech exports might remain weak next year in light of an anticipated slowdown in the global economy, UBS said.
Private consumption would hold strong in the near term, as firms would likely distribute bumper bonuses to reflect their strong earnings from the tech upswing, it said.
In addition, the government has proposed an expansionary fiscal budget for the coming quarters, with economic development expenditure taking the biggest share, which should lend support to overall investment and economic growth, Deng said.
However, UBS forecasts a negative drag on Taiwan’s growth from expected US tariffs on Chinese imports even if there is no direct tariff on Taiwan’s shipments to the US.
China is a large end-market for tech and consumer electronics. A noticeable growth slowdown in China would put downward pressure on overall tech demand, especially products with large exposure such as personal computers and smartphones, it said.
Tariffs directly on Taiwan’s exports to the US, if they occurred, would bring further downsides to Taiwan’s growth, while slower regional and global growth would weigh on overall tech demand, it added.
However, Taiwan’s exposure to a US-China trade dispute would be smaller compared with other economies given its leading position in advanced semiconductor manufacturing and AI technology, the bank said.
Further breakthroughs in AI technologies could bring increased growth projections, it said.
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