The Taiwan Institute of Economic Research (TIER) yesterday raised Taiwan’s GDP growth forecast for this year to 3.02 percent, citing robust export-driven expansion in the first half that is likely to give way to a notable slowdown later in the year as the front-loading of global shipments fades.
The revised projection marks an upward adjustment of 0.11 percentage points from April’s estimate, driven by a surge in exports and corporate inventory buildup ahead of possible US tariff hikes, TIER economist Gordon Sun (孫明德) told a news conference in Taipei.
Taiwan’s economy likely grew more than 5 percent in the first six months of the year, Sun said, describing the front-loaded external demand as a “remarkable showing” that helped bolster corporate profit margins and spur private investment.
Photo: CNA
However, he said that the momentum is expected to taper significantly, with second-half growth potentially slipping below 1 percent on a year-on-year basis.
“Companies will face pressure on earnings as the early boost fades, which could dampen capital expenditure and weigh on consumer sentiment,” he said.
The sharp inventory buildup was a direct reaction to the tariff risks posed by the US under the administration of US President Donald Trump, which in April announced a 32 percent tariff on Taiwanese goods, later delaying implementation by 90 days.
While the exact rate has yet to be finalized, Taiwan has been engaging in trade talks to mitigate the fallout.
“The final results shouldn’t be too disappointing given that neighboring countries are celebrating,” Sun said, referring to Japan, Indonesia and Vietnam, which have already secured tariff rates of 15, 19 and 20 percent respectively.
TIER raised its private investment growth forecast sharply to 6.04 percent for the year, underpinned by surging demand for electronics tied to the global artificial intelligence (AI) boom. Taiwan is a key supplier of advanced semiconductors and information and communications technology components that support AI infrastructure.
Conversely, the think tank downgraded its projection for private consumption to 1.67 percent, down 0.3 percentage points, as consumer spending weakens amid lingering policy uncertainty and postponed big-ticket purchases, particularly in the automobile sector.
“Retail sales contracted in the first half, showing a clear wait-and-see attitude among consumers,” Sun said. “Clarity in trade and tariff policy will be critical to reviving domestic demand in the coming months.”
Recent stock market gains have helped buttress consumer confidence via wealth effects, partially offsetting the drag from cautious spending behavior, he said.
On the inflation front, TIER expects the consumer price index to moderate to 1.67 percent this year, aligning with the central bank’s 2 percent target, thanks to easing inflation and a stronger local currency.
The New Taiwan dollar is forecast to average NT$30.65 against the US dollar this year, strengthening from a previous forecast of NT$32.20.
Exchange rate volatility is likely to stabilize in the second half of the year as financial markets settle, Sun added.
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