Think tank raises Taiwan's 2024 GDP growth forecast to 3.81%

Taipei, July 20 (CNA) The Chung-Hua Institution for Economic Research (CIER) has raised its forecast for Taiwan's 2024 gross domestic product (GDP) growth to 3.81 percent, citing an improvement in exports and domestic consumption.

CIER said Friday that its latest GDP growth forecast was an upgrade from an earlier estimate of 3.38 percent made in April as Taiwan's export-oriented economy gets a boost from strong global demand for artificial intelligence applications.

With the Taiex, the Taiwan Stock Exchange's weighted index, repeatedly hitting new highs in recent trading sessions, an increase in wealth is expected to prompt investors to spend to boost private consumption, which will support Taiwan's economy, CIER said.

Despite the upgrade, CIER's estimate is still slightly below the government's. The Directorate General of Budget, Accounting and Statistics (DGBAS) forecast in late May that Taiwan's GDP would grow 3.94 percent in 2024, up from an estimate of 3.43 percent made in February.

After growing 6.56 percent in the first quarter, CIER said Taiwan is expected to report growth of 4.32 percent for the second, 3.39 percent for the third and 1.34 percent in the fourth.

Taiwan's economy rose only 1.28 percent in 2023 as its outbound sales were affected by inventory adjustments on the global markets.

At a news conference, Peng Su-ling (彭素玲), head of CIER's Center for Economic Forecasting, said a boom in emerging technologies such as AI applications and high-performance computing (HPC) devices boosted Taiwan's export performance.

According to CIER, Taiwan's exports in merchandise are expected to grow 8.32 percent in 2024, an upgrade from an earlier forecast of 7.89 percent.

To meet growing global demand, companies in Taiwan have been keen to invest and expand production, which is expected to push up imports, Peng said.

According to CIER, Taiwan's imports are expected to grow 7.31 percent this year, compared with an earlier estimate of 5.27 percent.

In addition, CIER said, private investment is expected to return to growth of 0.45 percent in 2024, sharply improving from a year-on-year decline of 11.21 percent in 2023. The latest forecast was up from an earlier estimate of a decline of 0.20 percent, CIER added.

In 2024, capital formation is expected to grow 1.87 percent, a significant rebound from an 8.24 percent decline a year earlier. The expected 1.87 percent growth also represented an upgrade from an earlier estimate of a 1.43 percent rise, CIER said.

The growth in private investment largely reflected a steady increase in machinery and other production equipment for manufacturers' production expansion at a time when local and foreign companies are coming up with plans to invest in Taiwan, Peng said.

CIER said a robust stock market is expected to strengthen wealth effects in Taiwan and encourage many investors to spend, which offset the impact of a relatively high comparison base over 2023.

The think tank said private consumption is expected to grow 2.95 percent in 2024, compared with an earlier estimate of a 2.09 percent increase.

Despite a pullback in the past few sessions, the Taiex has soared 4,938.45 points, or 27.54 percent, so far this year.

CIER said while prices of agricultural and industrial raw materials on the global markets showed signs of stabilizing, a weaker Taiwan dollar against the U.S. dollar is making imported items more expensive.

With fruit and vegetable prices in the local market steady, CIER said, the local consumer price index is expected to grow 2.16 percent in 2024, down from an earlier estimate of 2.30 percent. However, the expected CPI growth still came above the 2 percent alert set by the central bank.

In response, DGBAS Department of Statistics chief Tsai Yu-tai (蔡鈺泰) said prices of services and products, such as travel expenses, dining out costs and rents, served as a driver to the CPI growth this year.

In the first half of this year, CIER said, depreciation competition among the currencies in the Asian market and a deferred rate cut cycle by the U.S. Federal Reserve weakened the Taiwan dollar against the U.S. dollar.

The Fed, however, is expected to start to cut rates in the second half to push down the U.S. dollar index, which tracks the currencies of the six major trading partners of Washington against the greenback, the Taiwan dollar is expected to turn stable in the second half of the year, CIER said.

The average exchange rate of the Taiwan dollar is expected to stand at NT$31.96 against the U.S. dollar in 2024.

So far this year, the U.S. dollar surged more than 6 percent against the Taiwan dollar. The greenback closed at NT$32.730 against the Taiwan dollar on Friday, a new high since May 20, 2016, when the American unit ended at NT$32.752 amid a fund exodus and volatility among tech stocks on the U.S. markets.