Taiwan cuts economic growth forecast on weakening exports
Taiwan’s GDP for 2022 is now expected to be 3.06% higher than last year, revising down the 3.76%forecast it issued in August
Taiwan’s economy is likely to grow more slowly than previously forecast this year and next, the statistics office said on Tuesday, as it also cut its exports outlook due to global inflation, rate rises and China’s ZERO-COVID policy.
Taiwan, home to the world’s largest contract chip maker TSMC, had benefited over the past two years from soaring demand for tablets, laptops and other electronics to support the work and study from home trend during the COVID-19 pandemic.
But demand for those consumer goods is faltering due to lockdowns in Taiwan’s largest export market China to control the pandemic, interest rate hikes around the world to crimp soaring inflation, and the impact of the war in Ukraine.
Taiwan’s gross domestic product (GDP) for 2022 is now expected to be 3.06 per cent higher than last year, the Directorate General of Budget, Accounting and Statistics said, revising down the 3.76 per cent forecast it issued in August.
That would mark a slowdown from the 6.45 per cent logged for 2021, which was the fastest growth rate since the economy expanded 10.25 per cent in 2010.
“The world’s economic growth rate has become lower, trade volume has decreased, and low demand from other countries has reduced our exports,” agency head Chu Tzer-ming told reporters.
Agency official Tsai Yu-tai added that new US legislation to boost domestic chip manufacturing also brought uncertainty to Taiwanese production, but its impact was hard to assess.
The statistics agency now sees 2022 exports up 8.73 per cent on last year, compared with 13.51 per cent predicted earlier, saying that weakening demand in the second half would overshadow strong growth in the first half.
Taiwan’s exports are a bellwether of demand for global tech giants such as Apple Inc.
For next year, it said it saw 2023 GDP expanding 2.75 per cent compared with a prior estimate of 3.05 per cent, while exports would contract 0.22 per cent, compared with the 2.64 per cent expansion previously predicted.
China’s economy rebounded at a faster-than-anticipated clip in the third quarter, but a more robust revival in the longer term will be challenged by persistent COVID-19 curbs, a prolonged property slump and global recession risks.
The office also revised up Taiwan’s inflation outlook for this year and next. It expects consumer prices to rise 2.94 per cent from a year ago in 2022 and to increase 1.86 per cent in 2023. It had previously forecast a rise of 2.92 per cent this year and 1.72 per cent next year.
In the third quarter, GDP was up by a revised 4.01 per cent on a year earlier, growing slightly more slowly than indicated in a preliminary reading of 4.1 per cent, the agency said.
Taiwan’s central bank’s “flexible” monetary policy structure during a period of high uncertainty can help maintain price and financial stability as well as economic growth, its governor Yang Chin-long said on Tuesday.
The central bank has raised its benchmark interest rate three times already this year, and will hold its next quarterly rate-setting meeting on Dec. 15.
At the last meeting in September, the bank raised it by 12.5 basis points to 1.625 per cent.
It has repeatedly said it will tighten monetary policy this year, in line with counterparts elsewhere, but that inflation will be a key decider. The consumer price index, or CPI, rose an on-year 2.72 per cent in October, the third month in a row is has been below 3 per cent.
Speaking at an academic forum, Yang said Taiwan’s rate of tightening had been relatively mild compared with the United States and other major economies.
Though the current inflation “shock” is mainly driven by supply-side costs, the central bank must still adopt a tightening monetary policy to restrict inflation expectations in order to maintain price stability, he added.
But the central bank’s flexible monetary policy structure “in an era of high uncertainty” can help the bank achieve its statutory goals of price stability, financial stability and economic growth, Yang added.
While Taiwan’s export-dependent economy grew a much faster than expected 4.1 per cent in the third quarter, according to a preliminary reading, trade numbers have been wilting.
Taiwan’s export orders contracted more severely than expected in October on weak consumer demand hit by global inflation and interest rate hike woes.
The central bank will also give its revised forecast for 2022 economic growth on Dec.15. In September, it predicted a 3.51 per cent expansion, down from a previous prediction of 3.75 per cent.