Think tank cuts Taiwan’s GDP growth forecast to 2.31% for 2023

Taipei, April 25 (CNA) The Taiwan Institute of Economic Research (TIER) joined the growing list of think tanks to lower their forecast for Taiwan’s economic growth forecast in 2023, announcing on Tuesday a cut to its forecast for the nation’s gross domestic product growth to 2.31 percent, attributing the downgrade mainly to weakening global demand.

TIER also indicated that a weaker export performance has prompted manufacturers to scale back their investments, another blow to the local economy.

According to TIER, Taiwan’s GDP is expected to grow 2.31 percent in 2023, a cut of 0.27 percentage points from its earlier estimate of 2.58 percent in January.

The think tank appeared more upbeat than the government as the Directorate General of Budget, Accounting and Statistics (DGBAS) forecast in late February that Taiwan’s GDP will grow 2.12 percent. TIER was also more optimistic than Chung-Hua Institution for Economic Research (CIER), another major local think tank, which cut its forecast last week from 2.72 percent to 2.01 percent.

TIER said as the global economy has showed signs of slowing down, demand from end-users has declined, pushing down Taiwan’s outbound sales and resulting in investments being cut, which prompted the think tank to lower its forecasts for Taiwan’s export, import and investment growth in 2023.

Taiwan’s exports in merchandise and services are expected to fall 1.63 percent from a year earlier in 2023, compared with its earlier estimate of a 2.56 percent increase, while the country’s imports of merchandise and serves are expected to drop 0.73 percent, a cut from the previous forecast of a 5.07 percent increase, TIER said.

In 2023, Taiwan’s private investment is expected to fall 0.32 percent from a year earlier, a downgrade from an earlier estimate of a 2.30 percent increase, with fixed capital formation expected to grow only 0.42 percent, compared with an earlier forecast of a 2.84 percent rise, TIER added.

TIER said domestic demand is expected to serve as a pillar boosting the local economy as eased COVID-19 controls prompt consumers to spend.

As a result, TIER has left its forecast for the country’s private consumption growth unchanged at 5.95 percent for 2023.

TIER said Taiwan’s economy will fall 1.40 percent in the first quarter of this year before rebounding in the following quarters with growth expected to hit 2.34 percent in the second, 2.98 percent in the third and 5.13 percent in the fourth quarter.

Speaking with reporters, Gordon Sun (孫明德), director of the TIER Economic Forecasting Center, said the bottom of the local economy could be seen in the fourth quarter of last year and the first quarter of this year, and the country is likely to have an improved second half of the year as the U.S. economy, the largest in the world, appears better than expected, and China, the second largest economy, is expected to benefit from the removal of COVID-19 restrictions.

However, Sun said how the Chinese economy recovers, global financial woes as well as geopolitical tensions are expected to create uncertainty for Taiwan’s economy.

More important, Sun said, the business outlook of the global semiconductor industry is expected to weigh on Taiwan’s economic fundamentals, adding that continued inventory adjustments in the semiconductor industry could create more challenges to Taiwan’s outbound sales.

Echoing Sun, Liu Pei-chen (劉佩真), a researcher at TIER’s Taiwan Industry Economics Database, said she remains cautious about the global semiconductor industry as inventory levels are high and need more time to adjust before returning to healthy levels,

Commenting on Taiwan Semiconductor Manufacturing Co’s (TSMC) latest investor conference, where the world’s largest contract chipmaker announced it has lowered its sales forecast for 2023 but left capital expenditure unchanged, Liu said the unchanged capex plan indicates TSMC expects demand to improve in 2024 from 2023.

In addition, Liu said TSMC will be able to upgrade its technologies to cement the lead over its competitors through massive spending.

At its investor conference held last week, TSMC announced it expects its sales for 2023 to fall 1-6 percent from a year earlier, compared with an earlier forecast of a slight increase, while it has left its capex unchanged at US$32 billion to US$36 billion.

TIER has forecast that the local consumer price index will grow 2.20 percent in 2023, up from an earlier forecast of 1.95 percent. The latest forecast is in excess of the 2 percent alert set by the central bank.

Sun said uncertainty over international energy prices remains, which could create upward pressure on the CPI.

The DGBAS has forecast Taiwan’s CPI will grow 2.16 percent in 2023.