Think tank forecasts Taiwan’s 2018 GDP growth at 2.31%

Taipei-The Taiwan Research Institute has forecast that Taiwan's gross domestic product (GDP) will continue to grow next year, rising by an annual 2.31 percent, as the global economy maintains its recovery.

However, the 2018 domestic growth will be more moderate than the expected 2.53 percent increase in 2017 as global demand is likely to slow down somewhat next year, the think tank said Thursday.

With exports accounting for about 60 percent of Taiwan's GDP, its economic growth is heavily reliant on global demand.

The 2018 GDP growth forecast by the research institute was more upbeat than the government's projection, which was raised last month from 2.27 percent to 2.29 percent.

The institute has also raised its 2017 economic growth for Taiwan, from 2.01 percent to 2.53, slightly lower than the government's 2.58 percent projection.

Taiwan's exports of merchandise and services after inflationary adjustment are expected to show 6.58 percent annual growth in 2017, and slow down to a 2.72 percent increase in 2018, according to the think tank.

It said that while Taiwan's exports will benefit from a weaker Taiwan dollar as the world's major central banks tighten their monetary policies, that will be offset by lower global demand in 2018.

Taiwan's goods and services in real terms are expected to show a 5.20 percent increase in 2017 and 3.28 percent growth in 2018, the think tank said.

It forecast Taiwan's real private consumption growth at 2.14 for 2017 and 2.07 percent for 2018, and projected private investment increase at 0.07 percent and 2.81 percent, respectively, for the two years.

The think tank said although the government will raise wages for civil servants, teachers and military personnel by 3 percent next year, wages in the private sector will remain stagnant so private consumption is likely to be weak.

It forecast a 3.67 percent annual growth in Taiwan's capital formation in 2018, much stronger than the expected 0.76 percent increase in 2017.

Consumer price growth, meanwhile, is projected at 0.64 percent in 2017 and 0.88 percent in 2018. Taiwan's quarterly GDP growth next year will be 2.18 percent, 2.42 percent, 2.36 percent, and 2.26 percent, respectively, according to the Taiwan Research Institute.

Liu Tai-ying (???), founder of the institute, cautioned that a rate hike cycle implemented by the U.S. Federal Reserve and other major central banks will mean an end to the high liquidity in the global market, which could burst the current financial bubbles as asset values soar.

With Taiwan's heavy dependence on exports, it is vulnerable to external factors, in particular U.S. President Donald Trump's move toward trade protectionism, he said.

He said it would be an economic healthier situation if Taiwan's exports accounted for less than 50 percent of its GDP.

Source: Focus Taiwan News Channel