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Academia Sinica slashes 2019 growth forecast to 2.01%

2019/07/19 17:42

Academia Sinica research fellow Ray Chou / CNA file photo

Taipei, July 19 (CNA) Academia Sinica on Friday cut its forecast for Taiwan's gross domestic product (GDP) growth in 2019 from 2.45 percent projected in late 2018 to 2.01 percent, citing ongoing trade disputes between the United States and China.

Global manufacturing output and world trade volumes have plummeted sharply in the wake of the trade war, and the slowdown in global economic growth has impacted Taiwan, according to the institution.

Taiwan has seen a decline in export orders, export and industrial production, which resulted in real GDP growing by only 1.71 percent in the first quarter of 2019, a quarter-on-quarter decline, said Academia Sinica research fellow Ray Chou (周雨田).

Amid economic headwinds, intensified by high tariff barriers, the pressure on external trade has remained high, playing a major role in the lower annual GDP growth forecast, Chou said.

Real growth in private consumption was 1.32 percent year-on-year in the first quarter, highlighting markedly weak growth in consumption, Chou said, adding that it was mainly attributable to a decrease in the consumption of durable goods, such as motor vehicles and home appliances.

In addition, cumulative sales in the wholesale, retail and catering sectors during the first five months of 2019 fell by 1.43 percent year-on-year, corroborated by declining sales in the wholesale industry, he said.

This indicates that consumption is weakening, Chou said. However, there could be a silver lining to the U.S.-China standoff, following more transfers of U.S. orders from China to Taiwan, and increased investment at home by Taiwanese companies with operations in China, he said.

Chou explained that Taiwanese manufacturers' plans to increase their global capacity in Taiwan, as well as growing business opportunities, such as the expansion of 5G communications and artificial intelligence, are expected to offset some negative impacts in the second half of the year.

"In the short term Taiwan may be a victim of the trade war, but it could also provide good opportunities for Taiwan's economic transition," Chou said.

If the government seizes the opportunity to offer fiscal incentives, such as tax cuts and easier accesses to land and energy, more Taiwanese companies might consider investing more in Taiwan, according to Chou.

"Once these companies rebuild their supply chains in Taiwan, chances are high that they will stay for good," he said.

Academia Sinica's report on Friday expressed a 50 percent confidence interval that real GDP growth will range from 0.92 percent to 3.21 percent.

The chance of negative economic growth in Taiwan this year is 16.3 percent, which Chou said was "extremely small."

(By Lee Hsin-Yin)Enditem/AW