The Yuanta-Polaris Research Institute, one of the leading economic think tanks in Taiwan, on Wednesday forecast a 3.08 percent annual growth of the country’s gross domestic product (GDP) in 2023, slightly lower than its projected 3.4 percent growth for this year.
The think tank’s 2023 economic growth forecast, its first so far, was close to that of the Directorate General of Budget, Accounting and Statistics (DGBAS), which last month gave an estimate of 3.05 percent growth.
For 2022, however, the DGBAS has projected that the domestic economy will grow by 3.76 percent, while Yuanta-Polaris has forecast 3.4 percent growth.
Speaking with reporters, Yuanta-Polaris Chairman Yeh Yin-hua (葉銀華) said the expected slowdown in Taiwan’s economic growth in 2022 and 2023, from 6.57 percent last year, was due largely to increased risks in the global economy and falling demand worldwide.
He said, however, that as most people in Taiwan are now co-existing with the COVID-19 pandemic, private consumption is gradually returning to growth, which is expected to offset the country’s weakened export performance and thus bolster the economy.
Despite the expected slower growth in 2022 and 2023, the domestic economy will remain sound, he said.
According to Yuanta-Polaris’ 2023 forecasts, private consumption in Taiwan is expected to grow 4.41 percent, while private investment will rise by 3.22 percent, and exports and imports will increase 4.15 percent and 4.25 percent, respectively.
The quarterly GDP growth in 2023 is projected at 1.65 percent, 3.95 percent, 3.95 percent and 2.75 percent, respectively, the think tank said.
Meanwhile, for 2022, private consumption growth in Taiwan is estimated at 3.19 percent, while private investments are expected to rise 6.89 percent, and exports and imports are forecast to grow 4.47 percent and 5.67 percent, respectively, Yuanta-Polaris said.
In the third and fourth quarter of the year, domestic economic growth is forecast at 4.15 percent and 2.73 percent, respectively, according to the think tank.
It said Taiwan is expected to face inflationary pressure by the end of this year, which will send its 2022 consumer price index (CPI) to 2.94 percent, higher than the central bank’s expected 2 percent.
The CPI growth is forecast to fall to 1.69 percent in 2023, however, as inflation is likely to moderate, Yuanta-Polaris said.
Commenting on the strengthening U.S. dollar, Yeh said the currency is to likely to continue to rise on the Federal Reserve’s aggressive interest rate hikes, which might prompt more foreign investors to move their funds out of Taiwan and into U.S. dollar denominated assets.
The Fed is expected to raise its key interest rates by another 75 basis points, when it holds its policymaking meeting later Wednesday, following a 225-basis point increase since March, Yeh said.
By the end of the year, the Fed is likely to increase interest rates by another 100 basis points, after which it may slow down the pace in the first half of next year, he said, adding that such a move would mitigate the pressure on the Taiwan dollar.
According to Yunata-Polaris, the Taiwan dollar is expected to average NT$29.81 against the U.S. dollar for 2022, with an average of NT$30.35 and NT$31.40 for the third and fourth quarter, respectively.
Source: Focus Taiwan News Channel