TIER cautiously revises 2018 Taiwan growth up

Taiwan’s growth forecast for this year revised up by 0.04 percentage point to 2.34%

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TAIPEI (Taiwan News) - Taiwan’s top-tier think tank Taiwan Institute of Economic Research (TIER) revised its economic forecast for Taiwan up by 0.04 percentage point to 2.34 percent for 2018, largely due to the upturn in the global economy, increased export orders, a potential pay raise wave, and the local stock market boom.

TIER economists, however, cautioned about a likely U.S.-China or global trade war and currency war, and a range of uncertainties caused by crude oil price rises, the U.S. tax cut and China’s Pollution Order.

On Thursday, TIER issued the GDP forecast and gave a positive economic outlook for 2018. The think tank’s Economic Forecast Center Director Gordon Sun (孫明德) attributed the raise of the forecast to the upturn in the global economy, increased export orders and salaries, and the local stock market boom, which are believed to stimulate domestic expenditure.

According to TIER, Taiwan’s export orders in December of 2017 increased 14.84 percent year on year. The average actual wages in the first eleven months climbed 1.85 percent. The Taiwan Stock Exchange Capitalization Weighted Stock Index jumped 0.78 percent in December alone with an expanded daily turnover at NT$116.93 billion.   

Also, a few investment plans by top semiconductor companies and a large government spending plan (Forward-looking Infrastructure Plan) are set to boost growth.

Aside from revising the growth rate up by 0.04 percent point, the think tank advised local businesses to prepare for China’s pollution order as the country is taking action on a widespread pollution crackdown, with reportedly tens of thousands of factories in China ordered to shut down last year, including some invested by Taiwanese companies. The new policy is believed to add to the operation cost for China-based Taiwanese petrochemical producers.

Speaking of the U.S. tax cut, Sun said it can stimulate the U.S. economy in the short term but in the long term it could harm fiscal stability. The tax cut along with financial rule relaxation are believed to attract investment or outflow of capital from Taiwan to the U.S.

The other uncertainties indicated by TIER included the higher than expected markup of international crude and raw material prices which might put producers under pressure.

On the other hand, Sun added, that the trade wars between the U.S. and China could leave impact to Taiwan as both countries are Taiwan’s important trading partners.