Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth from 3.1 percent to 3.38 percent, as exports could receive a bigger boost from global artificial intelligence (AI) demand.
“The nation’s exports would start to set sail from this quarter, thanks to better order visibility,” CIER president Yeh Chun-hsien (葉俊顯) said.
Exports, the main growth driver that accounts for 60 percent of GDP, would shift from a 9.8 percent decline last year to a 7.89 percent increase this year, as inventory adjustments come to a close, the think tank said.
Photo: Hsu Tzu-ling, Taipei Times
The low base last year would also help and explain why the recovery momentum would ease off quarter by quarter, Yeh said.
GDP growth is predicted to reach 5.57 percent last quarter, and to slow to 3.55 percent this quarter, 3 percent next quarter and 1.66 percent in the final quarter, he added.
Global AI demand has been stronger than expected and would ramp up businesses of local tech firms on its supply chain, Yeh said.
Revenue from AI server chips would more than double this year and would account for 20 percent of overall sales by 2028 from a contribution that is currently in the low teens, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) told investors on Thursday.
Yeh said the upward revision also aims to reflect an increase in government expenditure that would expand 2.68 percent this year to build up national defense and armament procurements.
Private consumption would register a healthy 2.09 percent gain, falling from an 8.32 percent uptick, as demand for outbound travel holds sturdy, especially after an earthquake which measured a 7.2 on the Richter scale jolted Hualien on April 3 and is expected to hinder tourism in eastern Taiwan, Yeh added.
CIER has a dim view on private investment, saying that the GDP component would shrink 0.2 percent this year after a deep 11.6 percent retreat last year.
Local firms remain cautious about capital spending, as the US Federal Reserve appears unlikely to cut interest rates anytime soon and Taiwan’s central bank last month unexpectedly raised borrowing costs by 0.125 percentage points, Yeh said.
Sticky inflation and spiking geopolitical tensions lent support to a conservative approach, he added.
CIER is looking at an inflation of 2.3 percent, which is above the central bank’s 2 percent alarm, mitigating little from a 2.49 percent rise last year.
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