Taiwan cut its forecast for 2022 growth for a second time as slowing global demand for electronics, high inflation and rising geopolitical pressure from China cloud the economy’s outlook.
Gross domestic product is likely to grow 3.76% for the year, the Cabinet’s statistics department said in a statement Friday. That’s lower than the most recent formal estimate of 3.91% in May, and compares with an unofficial estimate released last month of 3.85%.
Officials also raised their full-year forecast for inflation to 2.92%, compared with May’s 2.67% projection. Annual inflation hasn’t been that high since the global financial crisis in 2008, when it hit 3.53%.
Taiwan also revised its GDP growth rate for the second quarter to 3.05%, from a preliminary estimate of 3.08%. It expects GDP to expand 4.71% in the third quarter.
The main reason for the government’s downgraded forecasts is weaker exports, but lower-than-previously-estimated private consumption also played a role, the department’s head of statistics Tsai Yu-tai said at a briefing Friday.
Taiwan faces several headwinds this year, including waning worldwide demand for electronics and semiconductors -- critical exports for the economy. Warning signals from China and the US, Taiwan’s two largest export markets, are also weighing on the outlook. An economic slowdown in the US has sparked recession talk, while the Chinese economy has struggled with ongoing Covid outbreaks and lockdowns, as well as a property crisis.
“The main trajectory is that slowing global growth is affecting Taiwan,” said Eupho Lin, Chief Economist at Taipei-based Cathay United Bank Co. in a telephone interview. “Weaker exports makes companies adjust their inventories and that in turn makes companies either delay or reduce their capital expenditure plans.”
Then there’s the threat of military conflict and trade sanctions.
China launched a series of military drills around Taiwan following US House Speaker Nancy Pelosi’s recent visit to the island, escalating geopolitical tensions. Beijing also slapped trade curbs on some agricultural goods and construction materials.
Taiwan officials, however, have downplayed the impact of those trade restrictions, saying China’s economic measures against Taiwan are unlikely to have a major impact on trade between the two economies given how closely they’re intertwined.
Still, the statistics department lowered its outlook for exports this year, saying shipments are likely to grow 13.51%, down from their previous forecast of 14.62%