Taiwan's GDP forecast cut on coronavirus fears
By ECCT staff writers
The Taiwan government's Directorate General of Budget, Accounting and Statistics (DGBAS) has officially cut its forecast for gross domestic product (GDP) growth in 2020 to 2.37% in 2020, a downgrade from its earlier forecast of 2.72% made in November 2019, on fears that the spread of the 2019 novel coronavirus (Covid-19) will have an impact on both the domestic and international economy.
According to the DGBAS, following the lockdown imposed to prevent the spread of the virus in several major cities in China, the second largest economy in the world, production is expected to drop in its manufacturing sector. Other countries have also introduced measures to combat the virus, which are expected to affect production and consumption, increasing global uncertainty, the DGBAS said.
The DGBAS expects Taiwan's exports to take a hit due to weaker global demand, particularly in the first quarter of the year, forecasting first-quarter GDP growth of 1.8% from a year earlier, the lowest in 15 quarters.
In the next three quarters, GDP is expected to grow 2.50%, 2.75% and 2.40%, respectively, according to the DGBAS.
Citing slower global demand, the DGBAS cut its 2020 growth forecast for Taiwan's merchandise and services exports by 0.96 percentage points to 1.73%, and for imports by 1.03 percentage points to 1.62%.
The growth forecast for private consumption has been downgraded by 0.44 percentage points to 1.58%, and for fixed capital formation by 0.61 percentage points to 4.10%, the DGBAS said.
Despite the economic effects of the virus spread, online shopping and food delivery are likely to benefit as more consumers decide to stay at home to avoid contagion, according to the DGBAS.
Overall, the DGBAS expects the effects of the virus will cause no more than a 0.5 percentage point drop in the domestic economic growth for 2020, less than in 2003, when Taiwan was hit by SARS.
The DGBAS also revised down GDP growth for 2019 to 2.71 percent, 0.02 percentage points lower than data released last month.
The adjustment came after revised data showed the economy grew 3.31% in the final quarter of 2019, 0.07 percentage points lower than previously reported.