TIER raises Taiwan GDP growth forecast to 3.29%

• By Crystal Hsu / Staff reporter

The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its GDP growth forecast to 3.29 percent this year, a 0.14 percentage points increase from three months earlier, as exports gain faster traction despite disappointing private investment.

“The economic sectors showed improvement this month, especially businesses related to artificial intelligence,” TIER president Chang Chien-yi (張建一) said.

Taiwan’s exports recorded better-than-expected showing last quarter, thanks to strong demand for AI infrastructure investment in the US, he said.

Major Taiwanese tech firms released impressive earnings for the January-to-March period, but non-tech sectors may need more time to emerge from a global slowdown induced by sharp inflation and monetary tightening, Chang said.

Outbound shipments are expected to expand by 7.55 percent this year, while imports might rebound by 6.64 percent, with upward revisions of 0.7 and 0.1 percentage points respectively, TIER said.

Hopefully, AI benefits could later spread to non-tech sectors, Chang said.

An uneven recovery and mounting geopolitical tensions have resulted in firms remaining mostly conservative about capital spending, TIER economist Gordon Sun (孫明德) said.

Capital formation may only grow by 2.51 percent this year, while private investment would increase by only 1.11 percent, representing a slowdown of 2.19 percentage points and 2.13 points from the forecast in January, Sun said.

Semiconductor equipment imports last quarter plunged by 55.7 percent from last year, weighing on the overall purchases of capital equipment by 21 percent, Sun said.

Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) last week told investors it would keep its capital expenditure unchanged this year though AI profit contributions might rapidly rise in the coming years.

That means private consumption would continue to be the main growth driver this year despite sticky inflation, Sun said.

Consumer spending is expected to gain by 2.69 percent and lend support to the automobile sales and tourism sectors, Sun added.

The government would introduce stimulus measures after president-elect William Lai (賴清德) assumes office on May 20 to shore up domestic tourism, which is taking a hit from the earthquake, which measured a 7.2 on the Richter scale, on April 3 and the ensuing aftershocks, Sun said.

Consumer prices are expected to increase by 2.13 percent, which is 0.18 percentage points higher than the prior projection, helped by stubborn service charges and electricity tariff hikes, Sun said, adding that Taiwan should watch out inflation pressures from more expensive international oil prices amid developments in the Middle East.