Think tank lowers Taiwan's 2025 GDP growth forecast

Taipei, April 25 (CNA) The Taiwan Institute of Economic Research (TIER) on Friday lowered Taiwan's 2025 gross domestic product (GDP) growth forecast to 2.91 percent, due to rising uncertainty for the second half of the year.

The economic think tank said in a report that the adjustment of economic growth from 3.42 percent predicted in January is due partly to the upward adjustment of economic growth by the Directorate General of Budget, Accounting and Statistics, raising the base rate.

Another reason is the volatility of U.S. President Donald Trump's tariff policies.

After reciprocal tariffs were announced on April 2, Trump made an abrupt turn one week later and announced a 90-day pause on the policy, with tariffs of 10 percent to be implemented in the meantime.

This resulted in companies stocking up on inventory in advance before the higher tariff rates are implemented, the TIER said.

In the first quarter, Taiwan's imports, exports, manufacturing output, and export orders all performed strongly, driven by high demand for emerging technologies like artificial intelligence (AI) and inventory stocking by businesses, TIER said.

However, TIER Economic Forecasting Center Director Gordon Sun (孫明德) said that the 90-day halt of the tariffs has raised uncertainty, and the current frenzied manufacturing and purchasing activities are essentially dipping into the future.

As the stockpiling dies down, foreign demand will decline in the second half of the year, the TIER said.

In addition, as the global economy slows, the financial market will fluctuate. Recent poor stock performances will result in a reverse wealth effect and dampen consumer sentiment, according to the TIER.

Therefore, the TIER has lowered private investment growth by 1.56 percentage points to 4.1 percent and private consumption growth by 0.14 percentage points to 1.97 percent.

TIER President Chang Chien-yi (張建一) said that future development of the tariff policies is highly unpredictable, so the prediction was based on reciprocal tariffs being 10 percent and the expectations that global growth would slow.

The TIER has listed four main uncertainties in 2025 that will influence Taiwan's trade, investment and consumption, including the range and schedule of U.S. tariffs, the monetary policies of major countries, China's economic performance under escalating trade conflicts, and whether the global AI enthusiasm will continue.

Sun also warned that Trump may wage currency wars next.

This will result in different outcomes in currency value in Asian countries, where currencies in countries trading more frequently with China, compared with the U.S. -- including Singapore and Malaysia -- will move with the Chinese yuan and depreciate, whereas Japan, Taiwan, Thailand and Vietnam may see their currencies appreciate, Sun said.

The differences will greatly affect businesses' export competitiveness, he added.

Sun cautioned Taiwanese businesses to hedge against the possible appreciation of the New Taiwan dollar.