Taiwan’s export-oriented economy would continue to enjoy stable growth next year on strong global demand for electronics used in artificial intelligence (AI), although at a more moderate pace, two local institutes said yesterday.
Cathay Financial Holding Co (國泰金控) yesterday raised its forecast for the nation’s GDP growth this year to 4.1 percent, while Taiwan Research Institute (TRI, 台綜院) expected a 4.21 percent uptick.
Both institutes attributed their upward revisions to higher-than-predicted exports that they expected to be sustained, prompting local firms to step up investment to expand their capacity.
Photo: Cheng I-hwa, AFP
While AI demand would gain momentum, Taiwan’s GDP growth next year would slow somewhat due to a high base this year and headwinds from tariff hikes and geopolitical tensions, National Central University economic professor Hsu Chih-chiang (徐之強) said on behalf of a Cathay Financial research panel.
US president-elect Donald Trump has pledged to raise tariffs on goods from Canada, Mexico and China, where Taiwanese firms had set up presence with an aim to take advantage of favorable tax terms at the time.
“Trump poses the biggest uncertainty for the global economy ahead, since tariff hikes are bound to raise production costs and weigh on global trade,” Hsu said.
Cathay Financial is looking at a GDP growth of 2.8 percent next year, reflecting Trump’s tariff threats and China’s failure to emerge from the woods, Hsu said, adding that a high base this year would also come into play.
New Taipei City-based TRI displayed more optimism with a forecast of 3.16 percent GDP growth for next year.
TRI founder Liu Tai-ying (劉泰英) said that AI would play a pivotal role in driving the global economy, a favorable trend for Taiwan, since local tech firms command leadership positions in related technology processes.
“The world needs Taiwan’s chips,” Liu said. “The more sophisticated they are, the greater their demand, which is beneficial to Taiwan’s economic prospects.”
In addition to tariffs, geopolitical tensions are casting a shadow on the global economy next year, Liu said, adding that political uncertainty is escalating in South Korea while lingering in the Middle East and between Russia and Ukraine.
Taiwan cannot stay above regional tensions, but its long-term outlook remains bright, Liu added.
Both institutes expect the central bank to keep policy rates unchanged at its board meeting next week, since its latest credit controls have succeeded in cooling the housing market.
Inflation would return to the 2 percent target, although dining out and shelter costs would stay elevated, the two institutes said.
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