The Taiwan Institute of Economic Research (TIER) yesterday cut its GDP growth forecast for Taiwan from 3.42 percent to 2.91 percent this year, as the nation’s economy is bracing for a bumpy ride amid mounting global uncertainties and US trade policy swings.
It pinned the downgrade chiefly on US President Donald Trump’s unpredictable trade policy stances, after his April 2 announcement of sweeping “reciprocal” tariffs sent shockwaves through global supply chains, only to be postponed a week later by 90 days.
“No one can confidently predict the final shape or impact of Trump’s tariffs,” TIER president Chang Chien-yi (張建一) said.
Photo: CNA
The forecast only factored in the universal 10 percent tariff and the possible drag from a slowing global economy, he said.
TIER economist Gordon Sun (孫明德) said that rush orders and front-loading by firms at home and abroad to deal with future tariffs bolstered exports last quarter, despite weak seasonality.
Sun said he doubted front-loading demand is sustainable, adding that it might dampen the demand during the high season in the second half of the year.
Taiwan’s first-quarter economic numbers were impressive, thanks in part to robust demand for electronics used in artificial intelligence (AI)-related technologies, government data showed.
“However, the momentum would prove short-lived,” Sun said.
Furthermore, consumer and investment confidence has started to fall, as global stock markets falter and volatility deepens, the economist said.
Corporations would exercise caution in spending and expansion plans, he said.
Against that backdrop, TIER slashed its private investment growth forecast by 1.56 percentage points to 4.10 percent for this year, while private consumption is expected to rise a mild 1.97 percent, down 0.14 percentage points from the earlier estimate, the institute said.
Taiwan’s export-oriented economy would slow down quarter by quarter, Sun said.
Adding to the headwinds are growing doubts over whether the AI boom can be sustained, after being the growth driver for the past two years, Sun said.
US tech giants are reportedly scaling back AI investment plans, which is unfavorable for Taiwanese firms on their supply chains.
The US is also mulling semiconductor tariffs and tightening restrictions on advanced chip exports to China, moves that could hit Taiwanese chipmakers and server suppliers hard, he said.
Clouds are gathering, with the manufacturing climate index last month falling to 95.0, TIER said, citing a monthly sentiment survey.
The percentage of manufacturers with optimistic views for the next six months dropped from 35.1 percent in February to 19.7 percent last month, while those with pessimistic views nearly tripled to 29.8 percent, it said.
The service sector’s confidence reading declined for the third consecutive month to 88.51, as the stock rout caused a negative wealth effect and drove investors to the sidelines, the institute said.
Even construction firms, a sector buoyed by public infrastructure projects, were not immune, it said.
The industry’s climate index slipped 7.35 points to 94.34, weighed by local share price corrections and the central bank’s lingering credit controls, it said.
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