The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday trimmed its forecast for Taiwan’s GDP growth this year from 3.22 percent to a range of 2.85 percent to 0.16 percent, depending on how US tariffs settle and affect Taiwan and the world.
It is the first time the Taipei-based think tank laid out a growth range rather than a clear-cut figure, saying it is extremely difficult to arrive at a conclusion given US President Donald Trump’s unpredictable trade policy.
“The only certainty is that [Taiwan’s] GDP growth is set to slow while inflation pressure would go up,” CIER researcher Peng Su-ling (彭素玲) told a media briefing.
Photo: Hsu Tzu-ling, Taipei Times
Trump on April 2 announced a 32 percent tariff on imports from Taiwan, but one week later introduced a 90-day suspension for major trading partners except China.
Despite the respite, uncertainty surrounding global trade has rattled corporate confidence, especially in trade-reliant economies.
In a worst-case scenario, Taiwan’s GDP growth could falter to just 0.16 percent this year, if global trade tensions escalate into a full-blown recession or stagflation, CIER president Lien Hsien-ming (連賢明) said.
The biggest problem right now is uncertainty, leaving local manufacturers hesitant to make new investments or other major decisions because the future is so murky and fluid, the academic said, adding that the chance of the worst-case scenario is low at 10 to 20 percent.
The 90-day suspension has brought a wave of urgent orders to Taiwanese firms, but Lien said the momentum is unlikely to sustain for long.
It is too early to tell how Taiwan would emerge from the US-China trade war, though the country is receiving short-term benefits in the form of order transfers, Lien said.
Taiwan’s heavy reliance on both the US and China as key export destinations leaves it particularly exposed, the academic added.
In an optimistic case, Taiwan could achieve GDP growth of 2.85 percent this year, providing technology and consumer electronics products are exempted from extra tariffs other than the universal 10 percent, and the world dodges a recession, the CIER said.
The baseline case assumes higher, but still competitive tariff rates for Taiwanese goods, and the nation’s GDP growth would therefore manage to reach 1.66 percent, Lien said.
The Trump administration has not yet arrived at a final decision on whether to impose tariffs on semiconductors and how much if the answer is positive.
Lien expressed cautious optimism that Washington and Beijing would eventually seek a negotiated settlement, as a prolonged confrontation would inflict economic damage on both sides.
CIER is looking at an increase of 1.99 percent to 2.08 percent in the consumer price index this year, it said.
Volatility is likely to persist in the short term, making close monitoring of trade developments critical for Taiwan’s policymakers and businesses, Lien said.
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