2023 GDP forecast cut to 1.61%

21 August, 2023

By ECCT staff writers, DGBAS


Taiwan’s real GDP is projected to grow by 1.61% in 2023, according to the latest preliminary estimate from the Directorate General of Budget Accounting and Statistics (DGBAS). This represents a downward revision of by 0.43 percentage point from the previous forecast.


According to the DBBAS, global economic growth is projected to slow down due to the demand crunch caused by inflation, tightening monetary policies and the slow economic recovery in China. In addition, consumer spending has shifted from goods to services after the pandemic and the prolonged inventory reduction policies exacerbated dampening final demand. The DBBAS cited the International Monetary Fund (IMF), which says that falling global demand momentum will reduce projected global trade volume growth by 2.0%. However, the continued recovery of International tourism inflows would drive travel revenue. In aggregate with services exports, real exports of goods and services will shrink by 1.74% in 2023. In Taiwan real private consumption is expected to grow by 7.94% on the back of the rising consumption after the pandemic along with strong gains in shopping, recreation, and dining out. Growth has also benefited from the flourishing out-bound tourism owing to the reopening of borders, the stabilizing labour market, the government's universal cash remittance since April and pandemic-related insurance payouts as well as the continuing investment of airline companies to expand aircraft fleets to cope with the increase in overseas travel. However, enterprises’ capital expenditure is expected to stay cautious due to the uncertain global outlook and the effect of previous year’s high base. Real private fixed capital formation is expected to decrease by 5.93% in 2023.


The DGBAS also projects that Taiwan’s Consumer price Index (CPI) will increase 2.14% in 2023, revised downward by 0.12 percentage points, mainly reflecting falling raw material prices and the rise in housing rental, food away from home and entertainment expenses due to the increased demand.

The DGBAS made the revision after reporting that real GDP grew by 5.62% on a quarter-on-quarter, seasonally-adjusted annualized basis (saar) and by 1.36% on a year-on-year basis (yoy) in the second quarter of 2023, which was 0.09 percentage point lower than the previous advance estimate. Meanwhile, the economic growth rate of 1Q23 has been revised to -3.31% (formerly -2.87%). On the demand side, real private final consumption expanded by 12.56% in 2Q23, mainly driven by the extended recovery of expenditures on services such as dining out, accommodation, recreation, transportation, as well as consumption on vehicles and the flourishing outbound tourism.


Regarding gross capital formation, investment in transportation equipment grew significantly in 2Q23. However, investment in construction, machinery equipment and intellectual property decreased. Combining the reduction of inventory, real gross capital formation declined by 13.44% in the quarter.


In addition, real exports of goods and services dropped by 7.03%, mainly dragged down by weak global demand and prolonged inventory adjustments. Imports also fell by 7.84% during the quarter.


On the production side, the manufacturing sector decreased by 10.13% in 2Q23, following the 12.38% decrease in the previous quarter, mainly due to the weak market demand for semiconductors, chemical materials, basic metals, fabricated metal products, and machinery & equipment.


Meanwhile, the wholesale and retail trade sector increased by 0.91%, with the decrease in wholesale offsetting the increase in retail. The transportation and storage sector grew by 35.83% in 2Q23 due to the growing number of passengers taking land and air transport. The financial and insurance sector increased by 2.85% in 2Q23, following the 4.39% decline in the previous quarter.

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