Taiwan's 2021 economic growth forecast at 4.8%

04/21/2021 06:30 PM
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Visitors to a recent consumer electronics fair in Taipei. CNA file photo
Visitors to a recent consumer electronics fair in Taipei. CNA file photo

Taipei, April 21 (CNA) Taiwan's economy is likely to grow by an annual 4.8 percent in 2021, after its 3.11 percent rise last year, the Chung-Hua Institution for Economic Research (CIER) said Wednesday, raising its forecast.

The latest growth forecast by the Taipei-based think tank was 1.07 percentage points higher than its prediction late last year of a 3.73 percent increase for 2021.

In raising its forecast, CIER cited three factors, the main one being stronger exports, as the world's two largest economies, China and United States, recover from the COVID-19 pandemic faster than expected, while the rate of vaccination in other major trade partners has picked up.

According to CIER president Chang Chuang-chang (張傳章), domestic demand has also been increasing steadily, as private consumption rises on loose liquidity as a result of a strong stock index.

CIER is predicting that private consumption in Taiwan will grow 5.08 percent this year, while domestic investment is expected to increase by an annual 3.92 percent, driven by stronger economic activity, Chang said.

He forecast private investment growth of 4.38 percent in 2021, noting that several big technology companies in Taiwan are moving to build new factories.

On Tuesday, Nanya Technology Corp., Taiwan's leading dynamic random access memory (DRAM) chipmaker, announced a plan to build a new 12-inch silicon wafer plant in New Taipei at a cost of NT$300 billion (US$10.63 billion).

CIER warned, however, that the current drought in Taiwan, the worst in nearly six decades, could have an adverse impact on domestic investment, as the government has been forced to implement water rationing in the worst-hit areas.

"The longer the rationing lasts, the bigger the impact will be on domestic production activity, in the short term," the think tank, one of the biggest in Taiwan, said in its report.

In the long term, water rationing could affect businesses that are planning investments, CIER said.

The third factor in CIER's higher economic growth forecast is widespread optimism toward Taiwan's economy, Chang said, noting that National Development Council Minister Kung Ming-hsin (龔明鑫) recently expressed hope for an annual growth of 5 percent in 2021.

While a 5 percent rise "is not impossible, it will be difficult to achieve," Chang said.

In terms of commodity prices, CIER forecast that Taiwan's 2021 consumer price index (CPI) will rise by an annual 1.55 percentage points to 1.31 percent, driven by higher shipment costs and commodity prices, as global demand for goods and services continues to grow.

In the area of foreign exchange, the Taiwan dollar is likely to appreciate by an annual 4.02 percent against the U.S. dollar this year, rising to NT$28.39, as real estate and stock markets gain strength, CIER projected, noting that the exchange rate last year averaged NT$29.58.

Further ahead, CIER has forecast an annual economic growth rate of 3.23 percent in 2022, but Chang cautioned that the rate of recovery will depend on the pandemic situation, vaccination success rates, and trade relations between the U.S. and China.

Geopolitics could lead to uncertainty, the economist said, adding that there are "invisible concerns over the future."

(By Pan Tzu-yu and Elizabeth Hsu)


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