The Directorate-General of Budget, Accounting and Statistics (DGBAS) last week slightly lowered its economic growth forecast to 3.14 percent, compared with the 3.29 percent it estimated in November last year. Agency officials said there were two reasons for the downward revision. First, the comparison base level was high last year, when GDP growth was 4.59 percent. Second, budget cuts by the legislature would affect government investment and spending, consequently reducing GDP growth momentum.
The agency said the nation’s export-driven economy would continue to benefit from steady demand for artificial intelligence (AI)-enabled mobile phones, PCs and other consumer electronics as well as moderate demand for AI data centers and servers, which would boost Taiwan’s role in the electronics supply chain and the local semiconductor sector. As chip firms continue to invest in advanced process technologies and expand packaging capacity, coupled with the aviation industry’s purchase of more aircraft in response to travel and cargo demand, private investment would rise 6.18 percent this year, up 0.61 percentage points from the previous forecast, the DGBAS said. Meanwhile, a stable labor market with rising wages and booming cross-border travel would lead to a 2.12 percent rise in private consumption, up 0.03 percentage points from the previous estimate, it said.
However, the legislature’s slashing of the central government’s budget for this year, including NT$21.7 billion (US$659.23 million) in operating expenses and NT$17.3 billion in equipment costs, drove the DGBAS to lower its estimates for government spending and fixed investment, which would affect GDP growth by 0.15 percentage points. The additional NT$63.6 billion in budget freezes pending negotiation could affect GDP growth by another 0.2 to 0.3 percentage points, it said. The agency also warned that Taiwan’s economic growth might fall below 3 percent if the freezes remain.
The nation’s economy is bracing for more upheaval from tariffs that Washington might impose, with Taiwan a potential target for reciprocal and semiconductor tariffs. Assuming that US President Donald Trump imposes the tariffs gradually in the second and third quarters, the effect on international trade is expected to slowly emerge in the third and fourth quarters, affecting Taiwan’s exports and economic growth. In other words, pay attention to the White House’s tariff policy and the responses of other countries, as they would affect global trade momentum, inflationary pressure and supply chain deployment.
The US is Taiwan’s second-biggest export destination after China. Last year, Taiwan was the sixth-largest contributor to the US trade deficit. In the face of potential reciprocal and chip tariffs, Taiwan has responded with diplomatic overtures and plans to boost semiconductor investment in the US. The impact could also be mitigated by reducing import tariff rates on US goods and increasing imports of US agricultural products, energy and vehicles.
Politicians should serve the public good and carry society forward, while creating room for economic progress. Instead, opposition party legislators have prioritized partisan interests over the public good, adding risks to the country’s economy, which is already facing pressure from global trade tensions, while local firms look at an increasingly precarious landscape after Trump’s tariff threats rattled global markets.
Despite those economic headwinds, Chinese Nationalist Party (KMT) lawmakers are pushing for universal cash payouts of NT$10,000 per taxpayer from a tax revenue surplus, which would cost more than NT$230 billion and harm the central government’s finances. Overall, opposition lawmakers’ budget cuts and cash payment plans would weaken national fiscal resilience, while crowding out social, cultural and defense spending. Experience shows that political turmoil only deepens uncertainty and legislators’ reckless proposals ultimately harm the economy and deprive future generations of opportunity.
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