The Directorate-General of Budget, Accounting and Statistics (DGBAS) yesterday trimmed its forecast for Taiwan’s GDP growth this year to 3.14 percent from the 3.29 percent it projected in November last year, as budget cuts are expected to curtail government expenditure and potential US tariff hikes raise uncertainty over global trade.
“Taiwan’s exports and private investment would remain robust on the back of expanding global investments in artificial intelligence [AI],” DGBAS Minister Chen Shu-tzu (陳淑姿) said.
The downward revision was also due to a high comparison base last year, when GDP growth was 4.59 percent, higher than 4.27 percent the agency had projected, Chen said.
Photo: Ritchie B. Tongo, EPA-EFE
GDP growth last quarter also fared stronger at 2.9 percent, beating the forecast by 1.06 percentage points, she said.
The high base exacerbates trade protectionism that is clouding the economic landscape internationally, while budget cuts by the legislature would affect government consumption and fixed investment, Chen said.
US President Donald Trump has threatened to impose tariffs of up to 100 percent on semiconductors, unfavorable for Taiwan’s chipmakers, which supply the bulk of the world’s chips.
Global trade is expected to grow 3.2 percent this year, slightly weaker than a 3.4 percent pickup last year, the DGBAS said, citing a report by the IMF.
Exports, a main growth driver for Taiwan, might expand 7.08 percent to US$508.6 billion, slowing from a 9.85 percent gain last year, it said.
However, rising demand for AI applications and high-performance computing would continue to bolster local firms in their supply chains, it said.
Lawmakers removed NT$39 billion (US$1.19 billion) from the central government’s budget for this year and froze an additional NT$63.6 billion, Chen said.
If the freezes remain, GDP growth might have difficulty staying above 3 percent, as the DGBAS would have to drop 0.2 to 0.3 percentage points from its prediction, Chen said.
Nevertheless, a stable labor market with wage increases would allow consumer spending to rise 2.12 percent, the DGBAS said.
At the same time, local semiconductor manufacturers are upgrading their processing technologies and packaging capacities to stay competitive and meet demand, it said.
The trend bodes well for private investment, which might grow 6.18 percent, an improvement of 0.61 percentage points from the previous forecast, the DGBAS said.
The aviation industry would also contribute to private investment, as demand for cross-border travel is rising, it said.
Consumer prices would return to within the central bank’s target range with an annual growth rate of 1.94 percent, the DGBAS added.
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