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Taiwan cuts growth outlook to 14-year low, but recovery seen in 2024

Taiwan’s trade-dependent economy is likely to grow at the slowest pace in 14 years in 2023 as sluggish global demand weighs on its hi-tech exports, but activity is expected to pick up again next year, the statistics office said on Tuesday.

Taiwan is a key link in the global technology supply chain for companies such as Apple Inc AAPL.O and Nvidia NVDA.O, and is home to the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co Ltd (TSMC) 2330.TW, TSM.N.

Its economy has been weighed down by soft global demand for its hi-tech products, especially micro-chips, though domestic consumption remains robust.

Gross domestic product (GDP) is now expected to expand by 1.42% this year, the slowest since it contracted 1.61% in 2009, the Directorate General of Budget, accounting and Statistics said.

The 2023 outlook was revised downward from the 1.61% growth forecast which was predicted in August, and would be well below the 2.45% growth rate recorded in 2022. ID:nL1N39Z0GY

“Taiwan’s GDP has managed to grow more than 1% this year thanks to consumption momentum,” said analyst Achilles Chen of Cathay Financial Holding.

“The official forecast for 2024 GDP is somewhat optimistic … The recovery is not as smooth as they have expected as consumption and export momentum is mild,” Chen said, adding he expects Taiwan’s central bank to hold interest rates steady next year.

The statistics agency now sees 2023 exports shrinking 9.9% versus last year, compared with 9.51% predicted earlier.
For 2024, the agency said it saw GDP expanding 3.35% compared with a prior estimate of 3.32%, while exports would rise 6.33%.

Taiwanese chipmaker TSMC 2330.TW said last month the semiconductor industry could be poised for recovery, led by demand for personal computers and smartphones, with artificial intelligence (AI) growth also increasing demand for its advanced chips and advanced packaging.

The statistics agency also revised Taiwan’s inflation outlook upward for this year and next. It expects consumer prices to rise 2.46% from a year ago in 2023 and to increase 1.64% in 2024, compared with prior forecasts of a rise of 2.14% this year and 1.58% next year.

In the third quarter, GDP rose 2.32% on a year earlier, unchanged from a preliminary forecast, the agency said.
Source: Reuters (Editing by Ben Blanchard and Kim Coghill)

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