Exports, Investments Fuel Taiwan’s Best GDP Outlook Since 2010
Taiwan raised its economic growth forecast for this year as an export and investment boom continues and it begins easing virus restrictions, giving a boost to consumption.
The government increased its full-year estimate for gross domestic product to 5.88% on Friday from a previous forecast of 5.46%. That would be Taiwan’s strongest annual growth since 2010 when the economy bounced back in the wake of the global financial crisis.
While officials are increasingly bullish about exports, raising their full-year growth forecast to 28.15% from 20.4%, they slightly lowering their second-quarter GDP reading to 7.43% from a previously-reported 7.47%.
Overseas shipments and private investment so far this year have been stronger than initially expected, both rising to an 11-year high, according to Chu Tzer-ming, head of the cabinet’s statistics department. He pointed out that this year’s growth in exports and investment were not bolstered by a low base in the previous year, unlike they were for their previous peak in 2010 in the aftermath of the global financial crisis.
Taiwan has outperformed other developed Asian neighbors such as South Korea, Japan, and Singapore largely due to strong export demand for its high tech goods. That’s helped to offset the drag on domestic spending that’s come from tighter virus restrictions following an outbreak in late spring.
Businesses have reported bumper sales this year, with companies listed on the Taiwan Stock Exchange posting a 20% gain in revenue in the first seven months of the year from the same period in 2020. Companies in the traditional sectors including shipping, plastics, and iron and steel saw major improvement in sales growth, the stock exchange said in a statement.
Chipmakers, who had been posting stellar numbers all year long, may even see more highs in overseas deals as new Covid-19 waves hit Southeast Asia and cause chip shortages to intensity again, Bloomberg Intelligence analysts Masahiro Wakasugi and Ian Ma said in a report.
“We expect capital expenditure from the chipmakers to remain strong and the renewable energy sector to benefit from government policies in the second half of the year, both of which will continue to bolster growth in private investment,” Ryan Ho, an economist at Jih Sun Securities Investment Consulting, said via telephone Friday.
Private consumption, which has experienced a severe slump due to lockdown measures from late May to early August, could also bounce back from the hit after the government began easing bans in restaurants and some recreation venues. Officials also plan to issue a second round of stimulus vouchers to help boost spending.
Friday’s raised growth forecast already takes into account the expected impact of the government’s planned NT$100 billion voucher program, Chu said, adding it is likely to increase GDP by 0.2 percentage point this year and by 0.1 point next year.
With exports set to remain strong, Taiwan’s two-speed economy will continue to hinge on the recovery in domestic consumption and island-wide control of the pandemic.
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