The Chung-Hua Institution for Economic Research (CIER) has cut its forecast for Taiwan's gross domestic product (GDP) for 2020 to 1.03 percent after accounting for the impact of the worldwide new coronavirus contagion.
The latest forecast was down from an estimate of 2.44 percent made in December because of the downside risks faced by Taiwan's exports and domestic demand, the CIER said Friday.
It was much more upbeat, however, than the forecast released by the International Monetary Fund on Tuesday, which projected Taiwan's growth in 2020 at minus 4 percent, a downgrade of 6 percentage points from its previous estimate in October.
The Cabinet-level National Development Council said the IMF was too downbeat, arguing that the government's stimulus and bailout packages will help the economy continue to grow in 2020.
It estimated that the virus could drag down GDP growth by 0.66-1.4 percentage points.
According to the CIER, Taiwan's GDP is expected to grow 1.83 percent in the first quarter, contract by 0.12 percent in the second quarter, and then grow 0.52 percent in the third quarter and 1.86 percent in the fourth quarter.
The CIER said the virus's economic effect in the first quarter seemed to be relatively mild as Taiwan's export growth remained in positive territory and consumer prices moved lower, helping overall growth remain above zero during the period.
The second quarter is more likely to feel the impact, however, after the contagion escalated in the United States and Europe in March, leading to massive lockdowns that have sent demand plunging and hurt Taiwan's export-oriented economy.
GDP growth will also likely be hurt in the quarter by local consumers staying at home and limiting their spending, the think tank said.
Weaker domestic demand is expected to undermine the tourism, food/beverage and airline sectors and increase the number of workers put on furlough, the CIER said.
The think tank expects the outbreak to ease in the second half of the year, allowing major economies to reopen their economies, and that should benefit Taiwan's economy, it said, but growth should remain below 2 percent.
The CIER said private consumption in 2020 is expected to grow 0.16 percent year-on-year, down from a previous forecast of 1.91 percent growth, while private investment is expected to fall 0.34 percent, a steep drop from the previous estimate of a 3.87 percent increase.
Capital formation growth for 2020 is expected to reach 1.27 percent in 2020, compared with an earlier forecast of 4.58 percent, the CIER said.
Exports and imports of goods and services in 2020 are expected to grow 2.03 percent and 1.40 percent, respectively, a cut from the previous forecast of 2.63 percent and 2.81 percent. (By Pan Tzu-yu and Frances Huang)