Taipei-The local central bank forecast Thursday gross domestic product (GDP) growth in Taiwan of 2.34 percent for 2020, with domestic demand expected to drive growth.
However, the forecast for 2020 is lower than the 2.40 percent increase expected by the central bank for 2019, after increasing its forecast for the year by 0.34 percentage points from the previous forecast in June.
It was the first time the bank has given a GDP growth forecast for 2020.
The central bank was more cautious about the local economy than the Directorate General of Budget, Accounting and Statistics, which forecast in late August that Taiwan's GDP will grow 2.46 percent and 2.58 percent in 2019 and 2020, respectively.
The central bank updated its GDP forecasts for Taiwan after concluding a quarterly policymaking meeting that day, where key interest rates were left unchanged for the 13th consecutive quarter.
After the rate decision, which was anticipated by the market, the central bank discount rate was left steady at 1.375 percent, rates on accommodations with collateral at 1.750 percent and accommodations without collateral at 3.625 percent.
The central bank said although the semiconductor industry will continue to invest in high-end processes and more Taiwanese firms operating overseas are expected to increase investment at home, a relatively high comparison base in 2019 is expected to cap private investment growth in 2020.
In 2020, the central bank said, private investment is expected to grow 3.04 percent, moderating from an estimate of 5.03 percent for 2019.
The central bank said since enterprises as a whole saw their profitability weaken in the first half of this year, they could be less willing to issue bonuses and cash dividends next year, but an increase in the minimum wage could offset the impact. As a result, the central bank forecast private consumption will grow 2.00 percent in 2020, compared with an increase of 1.96 percent forecast for 2019, the bank said.
The central bank said Taiwan's exports of merchandise and services for 2020 is expected to grow 3.08 percent, compared with an estimated 3.56 percent increase for 2019, adding the fall reflected a relatively high comparison base year.
Domestic demand is expected to contribute 2.26 percentage points to Taiwan's GDP growth in 2020, with net exports set to contribute 0.08 percentage points, the central bank said.
Commenting on the upgrade of its forecast for Taiwan's 2019 GDP growth to 2.40 percent, the central bank said that although global demand has been hurt by trade friction between the United States and China, Taiwan expects to get a boost from an increase in investment by Taiwanese firms at home which could help them mitigate the impact of the global trade war.
In the second half of the year, the central bank said, Taiwan's GDP is expected to grow 2.66 percent, compared with a 2.12 percent increase in the first half.
The central bank has also forecast the local consumer price index will grow 0.70 percent and 0.88 percent in 2019 and 2020, respectively, indicating mild inflation.
At a press conference held after the quarterly meeting, Central Bank Governor Yang Chin-long (???) told reporters that the bank found a large volume of foreign funds was remitted into the local foreign exchange market in certain periods of September so it stepped in to prevent wild fluctuations in the Taiwan dollar.
While the central bank has said it always respects market mechanisms, Yang noted that it is the bank's job to intervene in an appropriate manner to maintain market order.
However, Yang did not disclose the amount of foreign fund inflows into Taiwan so far this month, adding that the central bank is closely watching the market and checks all market movements.
Since the beginning of this month, the Taiwan dollar has risen NT$0.404 or 1.29 percent against the U.S. dollar amid eased global trade tensions and hopes that the U.S. Federal Reserve will cut its key interest rates further, which it did on Thursday.
Source: Focus Taiwan News Channel