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Taiwan's economy forecast to slow down over next 6 months: survey

2018/11/17 19:54:33

Taipei, Nov. 17 (CNA) Taiwan's economy is expected to slow down over the next six months in the wake of volatility in global equity markets and the impact of escalating trade tensions between the United States and China, according to the German think-tank Ifo Institute.

In its latest quarterly World Economic Climate survey, Ifo said the economic climate indicator in Taiwan fell to minus 42.1, its lowest level since the first quarter of 2012.

The slowdown in the local economy reflected recent turbulence in the global equity market at a time of concern over the trade situation between Washington and Beijing, the top two economies in the world.

The Ifo survey showed the sub-indexes for exports, imports, capital formation and private consumption moving lower over the next six months.

In addition, the survey showed a stronger U.S. dollar against the Taiwan dollar is expected to boost consumer prices, while interest rates could move higher and together with tightening monetary policy send equity prices lower.

The Ifo survey results echoed Taiwan Institute of Economic Research (TIER), a major Taiwanese think tank, which said Taiwan's Gross Domestic Product (GDP) growth is expected to slow to 2.2 percent, less than the anticipated 2.57 percent increase for 2018.

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

TIER expects Taiwan's GDP 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.

Commenting on the Ifo survey, Wu Ming-hui (吳明蕙), head of the NDC's Department of Economic Development, said volatility in global financial markets undermines confidence in the local economy.

Wu said the Dow Jones Industrial Average fell almost 1,400 points in just two days in October, which pushed down the benchmark weighted index on the Taiwan Stock Exchange by about 660 points on Oct. 11, with no sign that U.S.-China trade disputes will be resolved anytime soon.

There are also concerns that Washington will impose tariffs 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 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 from the beginning of next year.

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

However, Wu said since Taiwan's government will speed up the pace of public work investment, capital formation is expected to grow.

The escalating trade friction between Washington and Beijing is expected to lead some Taiwanese investors to relocate their investments back to Taiwan from China, which is likely to lend support to overall economic growth, Wu added.

(By Pan Tzu-yu and Frances Huang)