Taiwan GDP growth forecast to hit 2.20% in 2019: think tank

Taipei, Taiwan's gross domestic product (GDP) growth for 2019 is expected to hit 2.20 percent, shy of an expected 2.57 percent increase in 2018, the Taiwan Institute of Economic Research (TIER) said Monday.

TIER, one of the leading think tanks in Taiwan, said the lower GDP growth in 2019 is partly a reflection of escalating trade tension between the United States and China, which is expected to affect global demand and the pace of the world's economic recovery.

In addition, at a time of an interest rate hike cycle by the U.S. Federal Reserve and a tightening of monetary policy by other major central banks in the world, borrowing costs shouldered by enterprises are expected to move higher, while a stronger U.S. dollar is likely to lead to foreign fund outflows, which will impact the global economic recovery pace, TIER said.

The forecast shows that TIER appeared more cautious than the government toward the local economic growth, as the Directorate General of Budget, Accounting and Statistics (DGBAS) predicted in August that Taiwan's GDP growth for 2019 will hit 2.55 percent. The DGBAS is scheduled to upgrade its forecast Nov. 30.

In a news conference, Gordon Sun (???), director of TIER's Economic Forecasting Center, said Taiwan's GDP growth momentum has been slowing in the second half of this year amid the impact of the Washington-Beijing trade dispute and volatility in the equity market.

TIER's forecast of 2.57 percent growth for 2018 is higher than its previous prediction of 2.49 percent TIER made in July.

Taiwan's GDP grew 3.10 percent in the third quarter of 2018, 3.30 percent in the second and 2.28 percent in the third, and is expected to rise only 1.70 percent in the fourth, according to TIER.

While TIER came up with a forecast of a 2.20 percent GDP increase for 2019, if external factors continue to worsen, it is possible that Taiwan will face a challenge on how to maintain its economic growth at 2 percent next year, Sun said.

There have been concerns that Washington will impose a tariff on an additional US$267 billion-worth of imported goods from China -- the third round of tariffs -- which would mean that all U.S. imports from China will face punitive tariffs.

In the previous two rounds, Washington imposed a 10 percent tariff on US$200 billion-worth of Chinese goods in September after a 25 percent tariff on US$50 billion-worth of Chinese goods earlier this year. The 10 percent tariff is expected to rise to 25 percent by the end of this year.

China exported about US$500 billion in goods to the U.S. last year.

According to TIER, Taiwan's exports of merchandise and services for 2019 are expected to drop 3.55 percent from a year earlier, compared with an anticipated 3.92 percent increase for 2018, while imports for 2019 are expected to grow 3.98 percent, compared with 2018's anticipated 4.94 percent increase.

TIER said private consumption for 2019 is expected to grow 2.20 percent, lower than an anticipated increase of 2.26 percent for 2018, while private investment for 2019 is expected grow 3.12 percent, beating a forecast of a 3.10 percent rise for 2018.

The think tank said fixed capital formation for 2019 is expected to grow 4.40 percent in 2019, compared with an expected 3.55 percent increase in 2018.

TIER said Taiwan's GDP is expected to grow 1.60 percent in the first quarter of next year, 1.20 percent in the second, 2.90 percent in the third and 3.00 percent in the fourth.

With major central banks around the world kicking off their individual rate hike cycles, TIER said Taiwan is expected to start to raise interest rates in the first quarter of next year.

In September, the central bank decided to leave its key interest rates unchanged in a quarterly policymaking meeting, marking the ninth straight month for the bank to keep rates unchanged.

Source: Focus Taiwan News Channel