Taiwan Central Bank Raises Outlook as Economy Weathers Trade War

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Taiwan’s central bank boosted its 2019 economic growth forecast, adding to the growing number of upbeat forecasts that predict the island will ride out the U.S.-China trade war better than most of its neighbors.

The monetary authority raised its 2019 gross domestic product forecast to 2.4% from the earlier estimate of 2.06%, citing increased orders to Taiwanese companies from overseas amid the trade war as the main reason for their upgrade. It also forecast the economy to maintain that pace of growth next year.

The central bank kept its benchmark rate unchanged at 1.375% for a 13th straight quarter Thursday, even as the Federal Reserve’s easing preserved Taiwanese policy makers’ room to stimulate the economy if the trade war weighs more heavily on exports.

“The main reason for upgrading our GDP forecast is that overseas clients are shifting their orders to Taiwanese companies and that’s expected to benefit growth momentum for exports,” said Governor Yang Chin-long.

Taiwan’s government projected its economy to top all of the other three Asian tiger economies this year, with full-year growth seen at just under 2.5%, according to a government estimate published in August.

Taiwan’s decision to keep rates on hold came after Federal Reserve policy makers lowered their main interest rate for a second time this year and Chairman Jerome Powell said that “moderate” policy moves should be sufficient to sustain the U.S. expansion.

The better growth outlook is “mainly due to the effectiveness of the Taiwan government in supporting policies to attract manufacturing back home,” Andrew Fennell, Fitch Ratings sovereigns director, said at a briefing in Taipei Wednesday. “The near term benefits are obvious, but given that Taiwan is a small, open economy, in the long run it can’t stay out of the way if the trade war continues to worsen.”

--With assistance from Miaojung Lin.

To contact the reporters on this story: Chinmei Sung in Taipei at csung4@bloomberg.net;Samson Ellis in Taipei at sellis29@bloomberg.net

To contact the editors responsible for this story: John Liu at jliu42@bloomberg.net, Jeffrey Black, Jiyeun Lee

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