DGBAS cuts 2023 GDP forecast to 2.75%
By ECCT staff writers
The Directorate General of Budget Accounting and Statistics (DGBAS) has cut Taiwan’s official forecasts for Gross Domestic Product (GDP) growth rates to 3.06% in 2022 (down 0.7 percentage points from its previous forecast) and to 2.75% for 2023 (down 0.3 percentage points from previously).
According to a DGBAS news release, high prices of oil and raw material caused by Russia’s invasion of Ukraine and bottlenecks in the global supply chain continue to affect the economy. Most economies are shifting from accommodative monetary policy in response to inflationary pressures. These factors might reduce momentum in private consumption and fixed capital formation. In addition, China’s zero Covid policy is weighing on the global economy. Despite the emerging demand for new technological applications and enterprise digitalisation, which supported Taiwan’s exports in the first half of 2022, inflation, tightening monetary policies and pandemic controls in China have all weakened global demand in the second half. In aggregate with services exports, real exports of goods and services are expected to grow by 3.96% in 2022 while real private consumption is projected to grow by 3.29% as the domestic Covid-19 control restrictions are being eased and consumption is returning to normal. Meanwhile continuing investments in the semiconductor industry, reshoring by Taiwanese companies and sustained investment in green energy is expected to boost real private fixed capital formation growth to 7.3% in 2022. Combining the above components as well as spending by the public sector, Taiwan’s real GDP is projected to grow by 3.06% in 2022.
The DGBAS expects Taiwan’s Consumer Price Index (CPI) to increase by 2.94% for the full year in 2022, mainly reflecting higher import prices, and significant price hikes in food away from home and residential rents. Meanwhile prices for travel related expenses will remain high owing to increasing cross-border tourism.
Regarding its outlook for 2023, the DGBAS cited reports from the International Monetary Fund (IMF), that global demand is crumbling, which is projected to reduce world trade volume growth to 2.5% in 2023, down from 4.3% in 2022. However, capacity expansion of leading semiconductor manufacturers and sustained investment in offshore wind energy will support investment growth. Combining the contribution from the domestic sector, with recovering consumption driven by flourishing cross-border tourism, real GDP is expected to grow by 2.75% in 2023 while the CPI is expected to rise by 1.86%.