GDP forecast cut to 3.91%

27 May, 2022

By ECCT staff writers, DGBAS


Taiwan’s Gross Domestic Product (GDP) is expected to slow down to 3.91% in 2022 from the more robust growth rate of 6.57% in 2021. According to the latest forecast by the Directorate General of Budget Accounting and Statistics (DGBAS), the forecast has been revised down by 0.51 percentage points from previous forecast on the back of a projected global economic growth slowdown owing to the Russia-Ukraine war, interest rate hikes and lockdowns in mainland China.


In an official News Release, the DGBAS cited a forecast by the International Monetary Fund (IMF), that world trade volume growth is projected to be 5.0% in 2022, slowing from 10.1% in 2021. Nevertheless, the domestic advanced technology capacity expansion of leading semiconductor manufacturers responding to strong chipdemand derived from new technological applications and enterprise digitalization, and demands of infrastructure investments and inventory stockpiling will support Taiwan’s exports. The DGBAS forecasts that real exports of goods and services will grow by 5.85% in 2022. Meanwhile, despite the recent surge in Omicron variant cases, weaker stock market trading and falling auto sales caused by supply-chain disruptions, real private consumption will grow by 3.10%, mainly driven by wage and income increases, likely supported by the robust corporate profitability, and the low base effect. Finally, real private fixed capital formation is expected to expand by 4.64%. In addition to the continuing investment of the semiconductor industry and the reshoring by Taiwanese companies, it is also expected to be driven by sustained investment in offshore wind energy and its supporting businesses.


The DGBAS also predicts that the Consumer Price Index (CPI) will increase by 2.67% in 2022, an upward revision of 0.74 percentage points, mainly reflecting producers passing on higher import costs to retailers.


In the same News Release, the DGBAS reported that Taiwan’s real GDP increased by 3.14% on a year-on-year basis in 1Q22, 0.08 percentage point higher than its previous advance estimate. It also reported that GDP growth rates have been revised to 5.32% and 6.57% for 4Q21 and the full year 2021, respectively (formerly 4.86% and 6.45%).

On the demand side, real private final consumption grew by 0.46% in 1Q22, primarily due to weakness in service consumption such as transportation and recreation. Gross capital formation, investment in machinery equipment, transportation equipment and construction grew sustainably and steadily. Combining inventory changes, real gross capital formation expanded by 5.88%. In addition, real exports of goods and services grew by 8.95%, mainly supported by the increasing foreign demand for applications of emerging technologies, as well as flourishing shipment services accompanied by international trade. Imports also increased by 8.35%. On the production side, the manufacturing sector grew by 6.30% in 1Q22, following the 10.64% increase in the previous quarter, mainly due to the output expansion of semiconductor, machinery & equipment, and computers, electronic & optical products.

The wholesale & retail trade sector increased by 1.48%, after the expansion of 1.86% in the previous quarter. Although there was a sharp decline in passenger transportation caused by Covid-19. However, the freight transportation increased with the growth of manufacturing, whilethe transportation and storage sector declined by 3.18% in 1Q22. The financial & insurance sector grew by 2.50% in 1Q22, following the 8.90% growth in the previous quarter.

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