Morgan Stanley has raised its forecast for Taiwan’s economic growth this year to 11.6 percent from 8.9 percent, putting the economy on track for its fastest expansion in almost four decades as the artificial intelligence (AI) boom drives exports, investment and consumer spending.
Morgan Stanley expects private investment to increase 17.7 percent this year, with real capital formation accelerating to 23 percent in the second half from about 12 percent in the first half of the year.
Imports of capital equipment are forecast to surge 41.33 percent this year, while semiconductor equipment imports are expected to rise 29.41 percent and capital equipment output to jump 67.22 percent, it said.
Photo: Lam Yik Fei, Bloomberg
“The figures suggest that AI and high-performance computing demand is translating into actual equipment purchases and capacity expansion, rather than remaining confined to export orders,” Morgan Stanley said in a report this week.
Taiwan’s exports rose 44.7 percent in the first seven months from a year earlier, Ministry of Finance data showed. Morgan Stanley expects full-year exports to grow 20.7 percent this year, with shipment growth slowing to 13 percent in the second half from about 28 percent in the first six months.
The slowdown mainly reflects higher comparison bases and shipment timing, rather than a clear weakening in the semiconductor cycle, it said.
Private consumption is also gaining momentum, growing 5.38 percent in the first half from a year earlier.
Morgan Stanley expects consumption to expand 3.2 percent this year, up from 1.4 percent last year.
Still, inflation is emerging as a constraint. Morgan Stanley forecasts consumer prices to rise 2.1 percent this year and 2.2 percent next year, keeping inflation above the central bank’s 2 percent threshold. It expects the central bank to raise its benchmark discount rate to 2.125 percent in December from the current 2 percent, three months earlier than previously forecast.
“The central bank may need to act pre-emptively and keep rates higher for longer,” Morgan Stanley said, adding that the rate-hike cycle might be limited because credit controls and supply-side measures have already cooled the housing market.
The government’s plan to distribute another NT$10,000 cash handout to all residents next year could add about 0.3 percentage point to GDP growth next year, while the expansionary budget could also add to inflationary pressures, it said.
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