Taiwan's GDP growth forecast cut to 3.91% for 2022 (update)

05/27/2022 09:34 PM
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A pedestrian walk past a rather empty restaurant in Taipei Friday. CNA photo May 27, 2022
A pedestrian walk past a rather empty restaurant in Taipei Friday. CNA photo May 27, 2022

Taipei, May 27 (CNA) The Directorate General of Budget, Accounting and Statistics (DGBAS) has lowered its forecast for Taiwan's 2022 gross domestic product (GDP) to 3.91 percent, falling below the 4 percent floor the government had previously anticipated.

The downward revision is the result of geopolitical tensions from Russia's invasion of Ukraine, which has driven up inflation, and a spike in domestically transmitted COVID-19 cases in Taiwan, affecting private consumption, the DGBAS said Friday.

The latest GDP growth forecast represents a decline of 0.51 percentage points from the 4.42 percent increase estimate the DGBAS made in February.

The DGBAS also raised its forecast for Taiwan's consumer price index (CPI) by 0.74 percentage points from the February estimate to 2.67 percent, topping the 2 percent alert set by the country's central bank.

Slowing global growth

Speaking with reporters at a news conference, Chu Tzer-ming (朱澤民), head of the DGBAS, said that with global economic growth slowing down, it is unrealistic for Taiwan to maintain its GDP growth forecast at 4 percent or higher.

However, Chu emphasized that based on the newly released forecast, Taiwan's economy will still outperform the global economy, which is expected to grow 2.9 percent in 2022, citing the latest estimate made by global information services firm IHS Markit in May.

Commenting on the increase in the CPI growth forecast, Chu said as Taiwan expects to enjoy a 3.91 percent increase in GDP in 2022, it is unlikely the country will face the risk of "stagflation," a situation where the inflation rate is high, economic growth rate slows, and unemployment remains high.

According to the DGBAS, the anticipated CPI growth of 2.67 percent for 2022 is the highest level in 14 years and came about after the agency took into account the spike in international crude oil prices.

However, as the local manufacturing sector has been keen to invest more to upgrade technologies and expand production, Taiwan's economic structure has been improving and therefore there is no risk of stagflation, Chu said.

COVID-19

Also at the press conference, DGBAS' Department of Statistics Tsai Yu-tai (蔡鈺泰) said that despite the new wave of domestically-transmitted COVID-19 cases that started in April, the government did not raise the alert or seek to restrict movement.

However, members of the public still curtailed their activities, which has had an adverse impact on consumption, in particular in the food and beverage and tourism industries.

The impact on domestic consumption is expected to become more apparent in the second quarter of this year, Tsai said.

According to the DGBAS, preliminary data indicate Taiwan's GDP grew 3.14 percent, and the economy is estimated to grow 3.31 percent, 4.81 percent and 4.29 percent in the second, third and fourth quarter, respectively.

Citing the impact of the COVID-19 pandemic, the DGBAS said it has lowered its forecast for Taiwan's private consumption growth by 2.00 percentage points from the previous estimate to 3.10 percent.

Consumption, investment, exports

The downgrade in private consumption wiped out the GDP growth forecast by 0.5 to 0.7 percentage points this year, Tsai said.

The DGBAS has also cut its forecast for private investment growth in Taiwan by 1.04 percentage points to 4.61 percent for 2022. However, it said that semiconductor suppliers are expected to bring in new investments for production expansion.

In 2022, Taiwan's capital formation growth is expected to hit 4.64 percent, a downgrade of 1.23 percentage points from the previous forecast, the DGBAS added.

The cut in the private investment growth forecast largely reflects the relatively high comparison base of 2021, Tsai said.

Taiwan's exports in merchandise and services are expected to grow 5.85 percent in 2022, up 0.32 percentage points from the earlier estimate, while imports are expected to grow 4.52 percent, down 0.96 percentage points from the previous forecast, the DGBAS said.

The DGBAS remains upbeat about Taiwan's exports as many enterprises have been pushing for digital transformation, boosting demand for tech goods from Taiwan, while emerging technologies such as 5G applications and automotive electronics are expected to push up demand for tech items provided by the country, according to Tsai.

Taiwan continues to lead in high tech industries, in particular the semiconductor industry, which is expected to help the country secure more orders, Tsai said.

(By Pan Tzu-yu and Frances Huang)

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