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Taiwan raises its 2019 GDP growth forecast as trade war fears take hold

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An investor looks at share prices at the Taiwan Stock Exchange last year. Taiwan has raised its forecast for GDP growth for this year, reflecting increased investment by local suppliers looking to steer clear of the US-China trade dispute. DANIEL SHIH/AFP

Taiwan raises its 2019 GDP growth forecast as trade war fears take hold

Taiwan has raised its forecast for gross domestic product (GDP) growth for this year, reflecting increased investment in the country by local suppliers looking to steer clear of the trade dispute between the US and China.

The Taiwanese Directorate General of Budget, Accounting and Statistics (DGBAS) said in a statement on Friday that it has revised its estimate for GDP growth for this year to 2.46 per cent, up 0.27 percentage points from its previous forecast in May.

A big factor in the revision was increased investment at home by Taiwan-based companies operating in China that wanted to increase their production capacity in Taiwan to avoid punitive tariffs imposed by the US on goods made in China, the DGBAS said.

The trade dispute has also prompted a shakeup in the global electronics supply chain, leading to more production capacity in Taiwan, the DGBAS said.

In its statement, the DGBAS also gave its first forecast for growth in 2020, projecting Taiwan’s economy to grow 2.58 per cent next year.

Stable growth

DGBAS chief Chu Tzer-ming said that with more local firms operating overseas pledging to invest at home, Taiwan could see the pace of economic growth stabilise and even accelerate down the road.

Chu said the global trade dispute has affected the world’s economy but the increased investment could help Taiwan’s economy offset the impact of external factors.

According to the Ministry of Economic Affairs (MOEA), local companies have pledged to invest more than NT$500 billion (US$15.87 billion) so far this year under an MOEA incentive programme to draw investment from Taiwanese enterprises amid the trade dispute.

No data is available on how much of the investment pledged has been carried out, but DGBAS census department deputy director Tsai Yu-tai said the number of workers covered by labour insurance had increased as of the end of June, indicating some new investment has been made.

The DGBAS said it has raised its forecast for Taiwan’s real private investment growth after inflationary adjustments for this year by 0.53 percentage points from an earlier estimate to 5.01 per cent, the highest in six years.

The forecast was made as the semiconductor sector was continuing their efforts in high-end process development and could be expected to invest more, the DGBAS said.

Including investment from the government, real capital formation growth for this year is expected to hit 5.96 pe cent, the DGBAS said.

The DGBAS left its forecast for private consumption growth relatively unchanged, increasing it by 0.01 percentage points to 2.03 per cent.

Looking to 2020

Real merchandise export growth for the second quarter of this year rose 3.07 per cent, improving from a 0.42 per cent rise in the first quarter, the DGBAS said.

If service exports are included, Taiwan’s real exports of goods and services for this year are expected to grow 3.47 per cent, up 0.85 percentage points from an earlier estimate, the DGBAS said.

The real growth of merchandise and service imports in 2019 is expected to reach 2.90 per cent this year, up 0.67 percentage points from the previous forecast, the DGBAS added.

Taiwan’s GDP is forecast to grow 2.67 per cent and 2.90 per cent in the third quarter and fourth quarter, respectively, after a rise of 1.83 per cent and 2.40 per cent in the first and second quarters.

Looking ahead to 2020, the DGBAS said that with the return home of local companies, the government’s push for renewable energy development, and the telecom sector’s investments in 5G technology, real capital formation growth is expected to hit 3.56 per cent.

The DGBAS projected real private consumption growth for 2020 at 2.05 per cent, while real exports and imports of merchandise and services are expected to grow 3.50 per cent and 3.66 per cent,respectively.

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