IMF raises GDP forecast for Taiwan to 5.9%

The International Monetary Fund (IMF) has raised its forecast for Taiwan's gross domestic product (GDP) growth for 2021 despite a slight downward revision for global economic growth.

In a World Economic Outlook (WEO) report issued on Tuesday, titled "Recovering During a Pandemic," the IMF raised its previous 2021 GDP growth forecast for Taiwan from earlier this year by 1.2 percentage points to 5.9 percent.

The estimate was in line with the 5.88 percent annual GDP growth forecast of Taiwan's Directorate-General of Budget, Accounting and Statistics (DGBAS) in August.

The IMF also raised its forecast for Taiwan's GDP growth in 2022 to 3.3 percent, up 0.3 percentage points from its April estimate, but slightly lower than the DGBAS' 3.69 percent estimate.

The bullish forecast contrasted, however, with the IMF's downward revision of its previous projection of 2021 global growth by 0.1 percentage points to 5.9 percent.

"The downward revision for 2021 reflects a downgrade for advanced economies — in part due to supply disruptions — and for low-income developing countries, largely due to worsening pandemic dynamics," the report said.

It did not specifically address why Taiwan's growth forecast was revised upwards, though an improved export picture was likely the main reason, said Dachrahn Wu (???), the director of the Research Center for Taiwan Economic Development at National Central University.

"Taiwan's exports have been strong this year and will be the driving force behind economic growth," he said, though improved consumption could also help.

Domestic demand was hurt by a local COVID-19 outbreak from May to July, Wu said, but the recent loosening of restrictions and distribution of spending vouchers by the government this month could revive consumption.

If there are no further COVID outbreaks, the rise in domestic demand in the fourth quarter could offset or even overcome the gap in consumption in May and June, Wu argued.

"It is quite likely that this year's growth rate will exceed 6 percent," he predicted.

For South Korea, Singapore, and Hong Kong — the three other economies that along with Taiwan make up the "Four Asian Tigers — the IMF forecast growth of 4.3 percent, 6 percent, and 6.4 percent respectively.

In 2022, the same three economies are expected to grow by 3.3 percent, 3.2 percent, and 3.5 percent, respectively, it said.

China is expected to grow by 8 percent in 2021 and 5.6 percent in 2022, both down 0.1 percentage points from the IMF's July update, while Japan is expected to grow by 2.4 percent and 3.2 percent in 2021 and 2022, respectively.

The United States is expected to grow by 6 percent in 2021, down 1 percentage point from the IMF July update, and 5.2 percent in 2022, up 0.3 percentage points.

Among other economic indicators, the report predicted that Taiwan's consumer price index (CPI), a major gauge of inflation, would rise 1.6 percent this year and 1.5 percent next year, while the unemployment rate is expected to be 3.8 percent this year and 3.6 percent next year.

National Central University's Wu cautioned that the congestion at global ports and supply chain disruptions could increase the production costs of manufacturers in various countries in the fourth quarter.

That, along with an increase in the minimum wage next year, could fuel inflationary pressures in Taiwan next year, Wu said.

Source: Focus Taiwan News Channel