Academia Sinica forecasts Taiwan's GDP to grow 3.1% in 2025

Taipei, Dec. 23 (CNA) Taiwan's gross domestic product (GDP) is forecast to grow 3.1 percent in 2025, lower than this year's projection of 4.23 percent, due to uncertainty created by Donald Trump's second term in office as U.S. president which is set to begin on Jan. 20, 2025, and the challenges China faces on its road to economic recovery, Academia Sinica said Monday.

The Institute of Economics of Academia Sinica, Taiwan's top research institution, on Monday raised its forecast for Taiwan's GDP growth in 2024 to 4.23 percent, up from its estimate of 3.88 percent made in July, citing the rise of AI, the improvement of the economy, strong demand for emerging technologies, and expanded investment by manufacturers.

Looking forward to 2025, the real growth rate in exports of goods and services is expected to reach 6.53 percent thanks to the solid export growth of electronic products as well as information and communications technology goods driven by booming demand for emerging technology applications such as high-performance computing and artificial intelligence (AI), according to the Institute of Economics.

The development of AI applications, including drones, robots and low-orbit satellites, is booming but it remains to be seen whether there will be further breakthroughs next year, Lin Chang-ching (林長青), an adjunct research fellow at Academia Sinica's Institute of Economics, said at a news conference on the overall outlook for Taiwan's economy in 2025.

In terms of private investment, the real growth rate is expected to reach 5.46 percent owing to AI business opportunities, low-carbon development trends and robust demand for automation.

Meanwhile, despite the help of salary increases and bonus payments, the slower rebound in post-COVID-19 consumption coupled with uncertainties in the economy next year, means the real growth rate of private consumption is estimated at 2.02 percent, lower than the 2.09 percent forecast by the Directorate General of Budget, Accounting and Statistics (DGBAS), according to Lin.

Trump 2.0

The global political and economic situation next year is full of uncertainties, Lin noted, adding that after U.S. President-elect Trump takes office, the impact of his tariff plans on major trading partners and whether it will cause a global economic recession are factors that could affect Taiwan's economy.

The Institute of Economics observed that although Trump's tariff measures may promote the transfer of orders, they will also have an impact on related industries in Taiwan.

In addition, the financial environment in the United States is unstable, and China's economic recovery faces challenges. Whether China will depreciate the renminbi to counter U.S. tariffs and how this affects the movement of Asian currencies are important factors facing Taiwan's economy, according to the economics institute.

Under the institute's baseline scenario, Taiwan's economic growth rate is forecast to be 3.1 percent next year. If the economies of China and the U.S. are stable, Taiwan's economic growth rate is expected to reach 3.2 percent. However, if both perform poorly, Taiwan's growth rate could fall to 2.93 percent.

CPI

The Institute of Economics forecasts that the consumer price index in Taiwan will rise 2.02 percent in 2025, the fourth consecutive year in which year-on-year inflation breached the 2 percent alert level set by the central bank. The figure is higher than that expected by private sector think tanks, DGBAS, and the central bank.

Lin explained that it will take time for the two electricity price increases this year to be reflected in commodity prices. Moreover, the minimum monthly wage will continue to increase next year, while the salaries of military personnel, civil servants and public school teachers will also rise and a survey by the institute shows consumer expectations of commodity price increases are high.

Rent hikes will become a major source of pressure for high inflation, given that 24.3 percent of landlords have increased rents over the past three years and about 30 percent plan to do so in the next one to two years, according to a survey on the government's rent subsidy policy released by the Institute of Economics on Monday.