Taipei-The Taiwan Institute of Economic Research (TIER) said Wednesday that it has raised its forecast for Taiwan's gross domestic product (GDP) growth in 2020 on the back of higher than expected domestic demand at a time when many Taiwanese companies are investing more at home.
TIER, one of the leading think tanks in Taiwan, said Taiwan's GDP is expected to rise 2.67 percent from a year earlier, an upgrade of 0.22 percentage points from its earlier estimate of 2.45 percent made in November.
While the upgrade indicates TIER is more upbeat about Taiwan's 2020 economy, the latest forecast is still shy of the Directorate General of Budget, Accounting and Statistics' prediction made in November, which said GDP for the year is likely to grow 2.72 percent.
The think tank said trade friction between the United States and China has prompted more and more Taiwanese investors operating overseas, in particular in the Chinese market, to assign more resources to the home market in a bid to avoid the impact of higher tariffs imposed by Washington on Chinese goods.
In addition, the local semiconductor industry, led by Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, has been keen to upgrade high-end technology processes and expand production capacity by investing more at home.
TIER raised its forecast for Taiwan's private investment growth in 2020 from an earlier estimated increase of 3.86 percent to 4.15 percent, while the think tank has also revised up the country's fixed capital formation growth forecast from 4.20 percent to 4.80 percent.
TIER President Chang Chien-yi (???) told reporters that increased domestic investment by Taiwanese firms with overseas operations was not merely a knee-jerk reaction to the global trade war, it also represented careful planning.
Chang said even if trade friction between Washington and Beijing is fading, investments by Taiwanese companies are expected to continue as many Taiwanese firms are investing to build Taiwan into a high-end process development center for themselves.
Chang said investment accounted for 23.7 percent of total GDP in 2019, up from 20 percent in 2016, adding that the ratio could rise to 24-25 percent in 2020 as more and more Taiwanese companies pour more capital resources into the local market.
In addition to the upbeat mood about a strong showing in private investments, TIER is also optimistic about private consumption which it forecast will grow 2.05 percent in 2020, compared with an earlier forecast of 2.03 percent.
However, TIER cut its forecast for growth in merchandise and service exports from an earlier predicted increase of 3.30 percent to 2.87 percent for 2020, and also downgraded its forecast of growth in goods and service imports from 3.40 percent to 2.91 percent.
The think tank said the caution about exports came after taking into account the possibility that raw material prices will stay relatively low to offset the effects of higher outbound sales in high tech gadgets.
According to TIER, Taiwan's GDP is expected to grow 3.00 percent, 2.70 percent, 2.55 percent and 2.48 percent, in the first, second, third and fourth quarter of this year.
Meanwhile, TIER said sentiment toward the business climate among local manufacturers improved in December 2019 with the composite index for the manufacturing sector, which gauges such sentiment, rising 3.60 from a month earlier to 96.87.
The improvements largely reflected an increase in local investment, TIER said.
The sub-index for the property sector also rose 1.06 from a month earlier to 102.59 on the back of an increase in public work projects and a rise in residential and commercial property sales in the month, the think tank said.
In the service sector, the composite index rose 5.30 from November to 92.96 in December, boosted by a year-end buying spree as well as spending on election campaigns for the January presidential and legislative votes.
Source: Focus Taiwan News Channel