DBS expects Taiwan 2025 GDP to grow 3%, rates to stay unchanged

Taipei, Jan. 8 (CNA) Singapore-based DBS Bank has forecast that Taiwan's gross domestic product (GDP) will grow 3 percent in 2025, up from a previous estimate in October of 2.6 percent, due to an uptick in global demand for emerging technologies.

In a report issued at an economic forum Tuesday, DBS also said that while inflationary pressures in Taiwan are expected to ease this year, its central bank monetary policy will likely turn neutral and leave interest rates unchanged.

DBS senior economist Ma Tieying (馬鐵英) said at the forum that Taiwan's exports will continue to grow because of the rising popularity of artificial intelligence applications and expansion of the semiconductor industry.

According to the report, the global semiconductor sector typically experiences expansion cycles lasting around 30 months, indicating that the current cycle, which began in September 2023, has the potential to extend through the end of 2025.

In addition to AI development, which will drive further expansion of the electronics supply chain in 2025, Taiwan is expected to benefit from green energy development, the "silver economy," which caters to older consumers, and the Asian Asset Management Center policy, the report said.

Ma cautioned, however, that growth will moderate from an expected 4.4 percent increase in 2024 to 3 percent in 2025 because of the high base of comparison of the previous year and the weakening of consumption and investment momentum.

The DBS forecast was more cautious than that of Taiwan's government. The Directorate General of Budget, Accounting and Statistics forecast in late November that the local economy will grow 3.29 percent in 2025.

Ma said Taiwan's consumer price index is expected to grow 1.9 percent in 2025, with increases in food prices and housing costs likely to ease.

She said that while inflation in 2025 was likely to slow down compared to 2024, it would still be in the upper half of the 1.5-2.0 percent range, prompting the central bank to adopt a neutral monetary policy and leave interest rates unchanged.

According to the DGBAS, Taiwan's CPI will grow 1.93 percent in 2025, after rising 2.18 percent in 2024 and topping the 2 percent alert set by the central bank for a third consecutive year.

With Donald Trump back in the White House, Ma said his threats to raise tariffs on goods from China could affect Taiwanese companies that have operations in the Chinese market.

Ma said Taiwanese suppliers in China should increase their sales in the China market and lower their exports to ease the impact of "Trump 2.0."

During Trump's first term, Japan and South Korea made concessions by agreeing to import more U.S. cars and agricultural products to avoid steep tariffs on their automobile exports to the U.S., Ma said, and Taiwan could consider a similar strategy this time.