Taiwan Raises GDP Outlook as Investment Trumps Trade War

(Bloomberg) --

Taiwan raised its economic forecasts for this year and next as evidence mounts that the island’s outlook is benefiting from investment flows amid the U.S.-China trade war.

• The economy will grow 2.72% in 2020, according to a statement from the government’s statistics bureau Friday. In their most recent forecast in August, officials had predicted a 2.58% increase.
• Gross domestic product in the third quarter expanded a revised 2.99%, cementing Taiwan’s position as the most resilient of Asia’s four tiger economies to the U.S.-China trade war.

Key Insights

• Taiwan’s economy is expected to grow 2.64% this year, the statement said, buoyed by a surge in local investment by Taiwanese companies with facilities in China looking to avoid U.S. tariffs.
• “The main reason we upgraded the forecasts for this year and next is that investment is coming in ahead of projections,” Tsai Yu-Tai, director-general of the Directorate-General of Budget, Accounting and Statistics’ department of statistics. Chipmakers are increasing their capital expenditure and Taiwanese companies are bringing investment back home. On top of that, the investment in offshore wind will reach its peak next year and the application of 5G and other emerging technologies will drive overseas demand and exports.”
• “The key factor for 2020 growth to come in above 2.7% will be for exports and imports to rebound to the levels they were at when the trade picture was still good,” Winston Chiao, an economist at Taishin Securities Investment Advisory Co., said Friday. “We think it’s likely global trade will pick up next year but there are still variables. We’re not as optimistic as the government.”
• Taiwan will continue to see investment momentum next year but after the strong inflows this year, it will have a diminishing impact on GDP growth, according to Jih Sun Securities economist Jordan Su. He forecasts expansion to slow to 2.1% next year. “Unless the trade war really drops off next year and exports rebound in a big way, it won’t be easy for growth next year to come in ahead of this year based on investment alone,” he said.

Get More

• The government revised down its forecast for export growth in 2020 to 3.12% from 3.58% previously

To contact the reporters on this story: Chinmei Sung in Taipei at csung4@bloomberg.net;Miaojung Lin in Taipei at mlin179@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

©2019 Bloomberg L.P.