Taiwan Ratings Corp (中華信評) has raised its forecast for Taiwan’s economic growth next year from 2.1 percent to 2.4 percent, as strong demand for artificial intelligence (AI) products would provide a solid buffer against potential challenges.
“Strong and rising demand for AI-related devices will continue to propel Taiwan’s economy over the next year,” Taiwan Ratings corporate credit analyst Raymond Hsu (許智清) told a media briefing in Taipei yesterday.
Similar reasons also prompted the agency to increase its growth projection for this year from 4.2 percent to 4.4 percent.
Photo: Wu Hsin-tien, Taipei Times
Hsu said the revisions assume a scenario where US president-elect Donald Trump would not impose additional tariffs on Taiwanese goods after he takes office next month.
Trump has pledged to tighten tariffs on goods from Canada, Mexico and China, and he earlier said Taiwan should pay higher tariffs for stealing the US’ chip business.
The specter of unfavorable trading terms, as well as lingering geopolitical tensions and restrictive interest rates, would constrain economies with heavy dependence on exports such as Taiwan, Hong Kong, Singapore and South Korea, Taiwan Ratings said.
Local tech firms on the AI supply chain would fare better as they command leadership positions in technology processes, Hsu said.
Global technology giants have indicated plans to step up budgets in AI development and investment, a positive trend that would help offset an expected economic slowdown in China, the largest destination for Taiwanese exports, Taiwan Ratings said.
China’s consumer confidence remains slack, despite stimulus measures and Washington’s extra tariffs, if true, would attenuate its effort to come out of the woods, Hsu said.
The ratings agency is looking at tariff hikes from 19.3 percent currently to 25 percent after Trump’s inauguration, limiting China’s GDP growth to 4.1 percent next year, from 4.8 percent this year, he said.
Not all Taiwanese tech firms would evenly benefit from the AI fever. Demand for electronics used in AI equipment and cloud computing is strong, but that for consumer electronics and vehicles would underperform, due to a lack of breakthrough applications and sharpening competition, Hsu said.
As for non-tech sectors, the landscape appears dim going forward, Taiwan Ratings said.
Local makers of cement, base metal and mass commodity products would likely have to grapple with a persistent capacity glut and price cuts, with the Chinese market weighed down by trade disputes with the US, Hsu said.
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