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Taiwan economy faces 3 risks in 2019: analysts

International factors could exacerbate Taiwan’s growth cool down

Donald Trump and Xi Jinping

Donald Trump and Xi Jinping (AP photo)

TAIPEI (Taiwan News) – The Yuanta-Polaris Research Institute (元大寶華綜經院) and Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) believe Taiwan’s biggest economic challenges in 2019 are the U.S.-China trade war, financial market volatility, and geopolitical risks, reported CNA.

According a host of analysis, Taiwan’s economic growth is tapering off, and these three risk factors could catalyze a potential economic downturn.

Taiwan’s economy performed reasonably well in 2018 with GDP growth similar to regional neighbors, strong exports for most of the year, increased investment, and unemployment less than 4 percent.

In 2019, Taiwan’s economy is expected to grow by around 2.18 to 2.45 percent, depending on source of analysis. Some forecasts, like the one performed by the Cabinet-level Directorate General of Budget, Accounting and Statistics, decreased their growth expectations due to weaker growth in Q3-4 2018 and rising global uncertainty.

Yuanta-Polaris President, Liang Kuo-yuan (梁國源), told CNA that the U.S. economy appears to be in good shape, while political risks are rising in Europe, and the slowdown of China’s economy will accelerate.

Liang believes that Taiwan is in the final stages of a period of expansion, and the economy will enter into a period of tightening. He added that external factors have the potential to affect the performance of Taiwan’s economy.

Director of TIER’s Economic Forecasting Center, Gordon Sun (孫明德), agrees that Taiwan’s economy is entering a downward phase, and will be influenced by a range of external factors. Sun pointed to the U.S.-China trade war as potentially affecting Taiwanese exports, financial instability in the U.S., Europe, and emerging markets, and geopolitical risks.

Sun summarized Taiwan’s economy as being relatively small, and suggested that global uncertainty will have a cooling effect on Taiwan’s economy, and could accelerate a downturn.

Deputy Head of the National Development Council, Chen Cheng-mount (貞茂則), said that external risks will be greater in 2019, and these risks may affect exports, but Taiwan’s domestic demand will be strengthened by increases to government investment and wage growth.

Chen suggested that financial institutions have reached a consensus that the economy is set to slowdown, and added that some think tanks are geared towards a pessimistic outlook. He pointed to good profits in the private sector, and good economic fundamentals as causes for optimism.

Chen went on to say that some Taiwanese businesses are returning to Taiwan, or expanding operations here, and that the government is striving to put in place policies to stimulate private consumption.