The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday raised its GDP growth forecast to 3.05 percent this year on a robust first-half performance, but warned that US tariff threats and external uncertainty could stall momentum in the second half of the year.
“The first half proved exceptionally strong, allowing room for optimism,” CIER president Lien Hsien-ming (連賢明) said. “But the growth momentum may slow moving forward due to US tariffs.”
The tariff threat poses definite downside risks, although the scale of the impact remains unclear given the unpredictability of US President Donald Trump’s policies, Lien said.
Photo: CNA
Despite the headwinds, Taiwan is likely to outperform many other economies, thanks to its central role in the global supply chain for artificial intelligence (AI)-related technologies, Lien said, adding that AI development would continue to provide economic support through the remainder of the year.
CIER estimates that GDP growth in the first half reached 5.17 percent, but would slow to just 1.08 percent in the second half, as front-loading of export orders weighs on future shipments.
Global firms have stockpiled inventories ahead of potential new US tariffs, which are set to take effect on Aug. 1 after several extensions, he said.
“We should remain cautiously hopeful,” Lien added, adding that negotiations with Washington might still take place even if tariffs are announced.
Recent economic data have outpaced expectations, with exports surging 34.1 percent in the second quarter year-on-year, despite what is typically a soft season, Directorate-General of Budget, Accounting and Statistics (DGBAS) official Wu Pei-shuan (吳佩璇) said.
On the domestic front, CIER expects private consumption to rise 1.57 percent and private investment to grow 7.03 percent this year, fueled largely by capital spending in AI and high-tech sectors.
Inflation is projected at 1.89 percent for the year — below the central bank’s 2 percent target — as a strong New Taiwan dollar helps suppress import prices.
However, food and service costs remain elevated, CIER researcher Peng Su-ling (彭素玲) said.
Every NT$1 appreciation of the local currency would reduce annual consumer price index growth by about 0.1 percentage point, according to the DGBAS.
CIER expects the NT dollar to rise from NT$32.89 per US dollar in the first quarter to NT$28.39 in the fourth quarter, as the US Federal Reserve is expected to cut interest rates twice before the end of the year, potentially weakening the greenback and attracting capital inflows to Asia.
If the US imposes a 10 to 15 percent tariff on Taiwanese goods, a depreciation of the NT dollar to about NT$30 could help absorb the impact, CIER economist Liu Meng-chun (劉孟俊) said, adding that the local currency might need to weaken to NT$35 if the tariff reaches 25 percent.
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