Central bank cuts forecast for Taiwan GDP growth in 2025

Taipei, March 20 (CNA) Taiwan's central bank has lowered its forecast for the country's 2025 gross domestic product (GDP) growth to 3.05 percent, following its latest quarterly policymaking meeting on Thursday.

The Central Bank of the Republic of China (Taiwan) cut the GDP growth forecast from 3.13 percent made in December. The updated forecast shows the central bank is more cautious than the government, with the Directorate General of Budget, Accounting and Statistics (DGBAS) anticipating in late February that the country's economy will grow 3.14 percent in 2025.

The central bank said the downgrade reflects a relatively high comparison base in 2024, adding it will continue to watch the impact of uncertainty created by the Trump administration's tariff actions and adjust its forecasts quarter by quarter.

However, the central bank said the local export-oriented economy is expected to continue to benefit from strong global demand for emerging technologies such as artificial intelligence applications, while production expansion in the semiconductor industry is expected to pave the way for an increase in private investment.

In addition, private consumption will grow in a stable manner in the wake of an increase in the minimum wage and a wage hike for civil servants, military personnel and teachers, the central bank said.

As the market widely expected, the central bank decided to leave its key interest rates unchanged at a time of U.S. tariff policies, saying a decision to maintain monetary policy for now is expected to help stabilize the economy and financial markets.

Following the decision to keep rates unchanged, the discount rate remains at 2 percent -- which is still the highest in 15 years -- while the rate on accommodations with collateral is 2.375 percent and the rate on accommodations without collateral is 4.250 percent.

The central bank noted that while service sector costs, including rent, are rising, overall economic growth is expected to continue to moderate. In addition, international crude oil prices are forecast to trend lower, the central bank added.

As a result, the central bank left its forecast for growth in the consumer price index (CPI) and core CPI, which excludes fruit, vegetables and energy, for 2025 unchanged at 1.89 percent and 1.79 percent, respectively, with both below the bank's 2 percent alert level.

However, higher Taiwan Railway Corp. train fares and possible electricity and water rate hikes could prompt the central bank to raise its CPI growth forecast to around 2 percent for 2025.

Although the central bank did not introduce new selective credit controls to the local home market on this occasion, the bank said it has instructed banks to follow its instructions to cap the amount of mortgages and divert their funds to industries outside the real estate market.

The central bank said the seventh round of selective credit controls imposed in September 2024 has resulted in a fall in transactions and a slowdown in home price growth.

The central bank added it will carry out more banking examinations in a bid to reinforce current credit control measures and ensure stable financial conditions.

With the central bank's decision not to introduce new credit controls, Chou He-ming (周鶴鳴), first vice president of Taiwan Realty Estate, said the local home market will be able to take a breather.

However, the current credit controls have squeezed funding in the home market and such a tight fund supply is expected to continue until the fourth quarter of this year, Chou added.