Think tank maintains Taiwan's 2022 GDP growth forecast at 4.10%

04/25/2022 04:41 PM
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Taipei, April 25 (CNA) The Taiwan Institute of Economic Research (TIER) has left its forecast for Taiwan's gross domestic product (GDP) growth for 2022 unchanged at 4.10 percent despite a recent surge in domestically transmitted COVID-19 cases.

Gordon Sun (孫明德), director of the TIER's Economic Forecasting Center, said Monday the think tank maintained its previous 2022 growth projection made in January after taking into account robust global demand for information and communications devices.

Those devices account for more than 50 percent of Taiwan's total exports, putting Taiwan in good position to benefit from the strong global demand and grow at more than 4 percent this year.

The TIER's forecast was in line with the government's estimates.

Chu Tzer-ming (朱澤民), head of the Directorate General of Budget, Accounting and Statistics (DGBAS), said in late March that the DGBAS expected to lower its growth forecast after taking geopolitical crises into account, but said it would still be above 4 percent.

In February, the DGBAS forecast Taiwan's economy to grow 4.42 percent.

According to the TIER, Taiwan's GDP was expected to grow 2.00 percent in the first quarter of 2022, 3.66 percent in the second quarter, 6.15 percent in the third quarter, and 4.45 percent in the final quarter.

The think tank expected private consumption to grow 4.43 percent in 2022, while private investment should rise 4.25 percent and fixed capital formation should go up 4.78 percent.

Taiwan's exports and imports are expected to grow 4.37 percent and 4.35 percent, respectively, in 2022, it said.

Though it kept its GDP growth forecast unchanged, the TIER raised its projection for the rise in the consumer price index (CPI) to 2.40 percent from a previous estimate of 1.65 percent.

Commenting on inflation, Sun said Russia's invasion of Ukraine has pushed prices of commodities and raw materials sharply higher on the global market, which, in turn, has had an impact on local consumer prices.

"Taiwan has been adversely affected by uncertainty from the global economy, in particular a spike in international crude oil prices after the war," Sun said.

"In addition, COVID-19 lockdowns in China, where many Taiwanese companies manufacture goods, are expected to affect global supply chains, creating even more uncertainty," Sun said.

If the Russia-Ukraine war and the lockdowns in China come to a conclusion in the second quarter, upward pressure on inflation could be reduced in the second half of the year.

Meanwhile, a TIER survey has found that sentiment in the manufacturing sector fell 2.16 points from a month earlier to 99.21 in March, marking the third consecutive month of sequential decline.

The think tank said the fall reflected concerns over rising raw material prices, which have led to higher production costs, and interruptions in the global supply chain due to China's lockdowns.

Liu Pei-chen (劉佩真), who heads the TIER's Taiwan Industry Economics Services databank, said the shortage of chips for car production remained a headache for manufacturers and might not be eased until the first half of 2023.

A similar composite index gauging business sentiment in the service sector rose 0.88 from a month earlier to 95.05, after falling the two previous months, and sentiment in the construction industry dropped 0.67 to 105.34, marking the second straight month of decline.

Liu said property firms in Taiwan turned more cautious about their prospects after Taiwan's central bank raised its key interest rates by 25 basis points in March, which was higher than expected.

She said the central bank was expected to maintain a tight monetary policy the rest of this year.

(By Pan Tzu-yu and Frances Huang)

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