Taiwan would continue to ride the wave of artificial intelligence (AI) and outperform other Asian countries in economic performance this year, while the world copes with uncertainties linked to drastic shifts in US trade policy, HSBC Holdings PLC said yesterday.
The demand for Taiwan’s high-tech products used in AI is strong, and high-end computing would help boost the nation’s exports and capital expenditures, HSBC chief Asia economist and global research cohead Frederic Neumann told a news briefing in Taipei.
On the domestic front, Taiwan’s private consumption is poised to keep pace with its long-term economic trajectory, Neumann said, adding that the nation’s healthy labor market conditions — with unemployment rates consistently below 3.5 percent and more flexible wage growth — indicate that households’ spending power has been improving.
Photo courtesy of HSBC Taiwan
Data suggest that private consumption in Taiwan is resilient, and consumer sentiment remains healthy, as household spending plans so far have been above their long-term average, HSBC said.
Unlike other markets in Asia, such resilience has less to do with mitigating inflation, and more to do with a rebound in wage growth, the bank said, adding that Taiwan’s real wage growth has climbed to its highest level in many years, providing continued support for consumption.
While global demand for Taiwan’s technology products would help the recovery of the nation’s capital expenditure, further intensification of global trade protectionism would pose a downside risk that needs attention, Neumann said.
The lack of clarity on US tariffs would inevitably affect cross-border investments, at least in the short term, which would be negative for the Asian supply chain, HSBC said.
This could indirectly drag down economic growth in Asia, especially in Southeast Asian markets where Taiwanese firms have manufacturing bases and foreign direct investment inflows account for a large proportion of the overall economy, it said.
“Gone are the days when smaller markets benefited from exports as the US and China grappled with trade issues,” Neumann said. “Today’s world is much more turbulent and requires inner strength to support it.”
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