Taiwan Ratings Corp (中華信評) has upgraded its GDP growth forecast for Taiwan this year to 3.3 percent from its 2.4 percent estimate in March, citing robust first-half momentum fueled by a resilient technology sector and front-loaded export orders.
Despite the upward revision, the ratings agency yesterday cautioned that the economy would face mounting headwinds in the second half.
Taiwan’s economy remains vulnerable to external shocks due to its trade-dependent structure and exposure to global supply chains, Taiwan Ratings credit analyst Joe Lin (林顯勍) said at a news conference in Taipei.
Photo: Wu Hsin-tien, Taipei Times
“Export strength seen in the first half is likely to taper off as clients complete inventory restocking and early shipments intended to get ahead of anticipated US tariff hikes begin to fade,” Lin said.
The New Taiwan dollar’s sharp appreciation could also erode local exporters’ profit margins and reduce their competitiveness across tech supply chains, Lin added.
The local currency’s exchange rate against the US dollar is projected to stabilize at about NT$30 this year, as tariff-related volatility subsides, he said.
Washington is expected to announce further tariff details this week, as a 90-day waiver ends, a development that could influence Taiwan’s export performance.
Outside the technology sector, performance across traditional industries is mixed.
Taiwan Ratings credit analyst Beatrice Chen (陳靜儀) said the chemicals industry remains under pressure, with recovery lagging earlier forecasts.
China’s stimulus efforts are unlikely to provide meaningful relief, given underlying structural demand weaknesses, she added.
Steelmakers are also under strain, as subdued global demand, persistent overcapacity in China and rising exports weigh on prices and profitability of Taiwanese peers, Chen said.
In contrast, the cement industry is showing signs of stabilization. Improved pricing and production discipline in China, and lower coal costs are helping shore up margins, she said.
Steady income from non-cement operations and overseas businesses is also supporting cash flow stability, she added.
As for financial services, insurers are facing challenges amid market volatility.
Taiwan Ratings credit analyst Andy Chang (張書評) said that average returns on assets are expected to decline this year.
However, enhanced hedging strategies and regulatory support are likely to preserve the sector’s profitability, he said.
Life insurance premium growth is projected to be about 6 percent this year, driven by demand for US dollar-denominated, interest-sensitive and participating policies, Chang said.
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