Taiwan’s economic activity this year would gain support from firms’ inventory replenishment and artificial intelligence (AI)-related demand, even though the ongoing Middle East conflict threatens to push inflation higher, Yuanta Securities Investment Consulting Co (元大投顧) said yesterday.
The nation’s GDP is forecast to grow 8.72 percent year-on-year this year, up from the 5.3 percent expansion estimated in January, while consumer price index (CPI) is projected to increase to 1.83 percent from 1.59 percent, Yuanta said in a report.
Yuanta’s GDP growth forecast not only far exceeds Taiwan’s average growth of 3.11 percent over the past 10 years, but also is higher than the Directorate-General of Budget, Accounting and Statistics’ estimate of 7.71 percent and the central bank’s projection of 7.28 percent, making it the highest figure available from domestic and foreign institutions.
Photo: CNA
A breakdown of Yuanta’s forecast shows its upward revision is mainly driven by exports and investment, as exports are projected to increase 19.47 percent year-on-year this year and private investment is expected to grow 3.49 percent, while private consumption is likely to expand 3 percent.
Strong demand for emerging technologies and applications, such as AI and high-performance computing, has led major cloud service providers to increase AI-related capital expenditures, which in turn drives strong export growth for Taiwan’s electronics, and information and communications technology products, Yuanta said.
With the successive shipments of Nvidia Corp’s GB200 and GB300 processors, the mass production of application-specific integrated circuits developed by cloud service providers, and the debut of Nvidia’s Vera Rubin platform in the second half of this year, Taiwan’s export momentum is expected to continue trending up every quarter throughout the year, it said.
In addition, the momentum of domestic investment has also shown signs of acceleration as manufacturers build up inventories, tech firms expand production capacity, and semiconductor companies speed up development of advanced process and high-end packaging technologies, causing it to revise its growth forecast for private investment to 3.49 percent in the year from 0.47 percent, Yuanta said.
Regarding its lifting CPI growth forecast by 0.24 percentage points to 1.83 percent, Yuanta said the upward revision is primarily due to imported inflation caused by the conflict in the Middle East and soaring international oil prices.
Rising energy prices would directly reduce GDP by 0.43 percentage points by increasing consumer expenditure on fuels and raising production costs, it said.
Indirectly, they would trim GDP by another 0.15 percentage points by slowing down global demand and affecting Taiwan’s exports, it added.
However, Yuanta said it does not expect the nation to experience runaway inflation this year, as the current inflationary pressure stems from external shocks, rather than overheated domestic demand.
The CPI projection is conditional on an assumption that the government would maintain stable electricity rates this year and adopt measures to stabilize consumer prices, effectively mitigating the direct impact of increasing energy costs on people’s lives, it said.
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