Singapore-based DBS Bank has cut its forecast for Taiwan’s 2022 gross domestic product (GDP) growth from 3.4 percent to 2.9 percent, citing a deteriorating global economy and a cyclical downturn in the tech sector.
In a statement, Ma Tieying (馬鐵英), a senior economist with DBS, said that although the bank expected the pace of Taiwan’s economic growth to slow starting in the fourth quarter of this year, there was no indication a fall in exports would plunge the economy into a recession.
Ma added that a slowdown in outbound sales growth would pose one of the biggest challenges to Taiwan’s export-oriented economy.
In addition, DBS has also cut Taiwan’s 2023 GDP growth forecast from 2.8 percent to 2.3 percent, below the government’s minimum target of 3 percent.
DBS’s cautious estimates stand in contrast with the GDP growth forecasts of 3.76 percent for 2022 and 3.05 percent for 2023 published in mid-August by the Directorate General of Budget, Accounting and Statistics (DGBAS), and the local central bank’s predictions from late September of 3.51 percent for 2022 and 2.90 percent for 2023.
In September, Taiwan’s exports fell 5.3 percent from a year earlier to US$37.53 billion, ending a 26-month streak of export growth.
The Ministry of Finance has predicted that Taiwan’s exports will experience a 3-6 percent year-over-year decline in October to sit in the US$37.7 billion-US$38.9 billion range.
Ma cited a typical cyclical adjustment in the bellwether electronics sector for the decline in exports, saying that “as far as the tech sector is concerned, the downturn was driven largely by the downstream consumer electronics segment, and, to a lesser extent, by the upstream semiconductors.”
Moreover, Ma said escalating trade tensions between the United States and China could harm Taiwan’s outbound sales, adding that a sprawling ban on IC exports to Beijing by Washington could affect Taiwan’s semiconductor industry.
Ma said Beijing’s ban on Taiwanese agricultural and food products such as pineapples and grouper was likely to have a limited impact given that this business accounted for less than 1 percent of Taiwan’s total exports.
However, Ma urged Taiwan to stay alert over future sanctions imposed by China, which has served as the largest buyer of Taiwan-made goods and the most popular investment destination for Taiwanese capital.
Ma predicted that Taiwanese enterprises would pivot investment to Southeast Asia and other regions to diversify their supply chains and mitigate the impact of growing cross-strait tensions.
Ma said a move by Taiwan to reopen its borders amid COVID-19 on Oct. 13 could boost consumption and help the service sector grow.
Ma added that after increasing the country’s cap on weekly arrivals to 150,000, Taiwan was likely to receive an additional US$9 billion in annual income, contributing 1.3 percentage points to its GDP.
“Consumption and services will likely provide a better cushion to the economy this time,” she said.
Commenting on the current rate hike cycle, Ma suggested the local central bank would maintain a conservative course with a 12.5 basis point hike to key interest rates in the fourth quarter of this year and an additional 12.5 basis point increase in the first quarter of 2023 to tackle inflation.
Ma predicted Taiwan’s consumer price index would grow 3.0 percent in 2022, adding that inflationary pressure was likely to ease after the second quarter of next year, with CPI growth for 2023 expected to fall to 1.8 percent.
Source: Focus Taiwan News Channel