2023 GDP forecast cut to 1.41%

28 November, 2023

By ECCT staff writers, DGBAS


Taiwan’s real gross domestic product (GDP) increased by 2.32% in the third quarter of 2023 from the same period of previous year, according to the latest preliminary estimate from the Directorate General of Budget Accounting and Statistics (DGBAS). Meanwhile, the economic growth rates for 1Q23 and 2Q23 have been revised to -3.49% and 1.41% (from -3.31% and 1.36% previously). Based on the latest figures, the DGBAS has revised its full year GDP growth forecast to 1.42% for 2023 and to 3.35% for 2024.


On the demand side, real private final consumption grew by 9.23% in 3Q23, mainly driven by expenditures on services such as transportation, dining out, accommodation, recreation, as well as consumption on vehicles and the flourishing outbound tourism. Despite the emergence of AI applications, global demand remained weak, real exports of goods and services dropped by 1.35%. Imports also fell by 4.45% in the quarter. Regarding gross capital formation, investment in transportation equipment grew significantly. However, investment in construction and machinery equipment fell. Combining the reduction of inventory, real gross capital formation declined by 12.29% in the quarter.


On the production side, manufacturing sector output decreased by 4.7% in 3Q23, following the 9.92% decrease in the previous quarter, mainly due to the weak market demand for semiconductors, basic metal, fabricated metal products, and machinery & equipment.

Wholesale and retail trade increased by 0.73%, with the decrease in wholesale offsetting the increase in retail. The transportation and storage sector grew by 27.53% in 3Q23 due to the growing number of passengers taking land and air transport. The financial and insurance sector increased by 4.65% in the quarter, following 2.86% growth in the previous quarter. Despite tightening policy receding in many countries, global economic growth is projected to slow down due to the demand crunch caused by still high policy rate, the prolonged inventory reduction policies, as well as geopolitical tensions. According to the International Monetary Fund (IMF), momentum in global demand will reduce global trade volume growth. However, the continued recovery of international tourism flows will drive travel revenue. In aggregate, real exports of goods and services are expected to shrink by 3.75% in 2023. Real private consumption is projected to grow by 8.36%, supported by the improvement in the labour market and wage increases. Growth will also benefit from the normalizing out-bound tourism.


Real private fixed capital formation is anticipated to decrease by 9.81%, reflecting the effect of previous year’s high base and enterprises’ cautiousness to invest due to the global economic uncertainty. Combining the above components as well as the public sector, Taiwan’s real GDP is projected to grow by 1.42% in 2023, revised downward by 0.19 percentage point from the previous forecast. The Consumer price Index (CPI) is expected to increase by 2.46%, mainly reflecting the rise in fruit and vegetable prices owing to typhoons in the second half year and the rise in housing rental, and entertainment expenses due to the increased demand.


Looking ahead to 2024, according to the IMF, the global economy will grow mildly and the world trade volume is projected to grow by 3.5% in 2024, supporting Taiwan’s export growth. Moreover, the domestic capacity expansion of the advanced capacity of leading semiconductor manufacturers and enterprise digital transformation, overseas companies’ reshoring, as well as sustained investment in solar and offshore wind energy and net-zero emissions actions, all support Taiwan’s investment growth. Combining the contribution from the domestic sector, with the improving wages and the emerging consumption spurred by new technology, real GDP is expected to grow by 3.35% in 2024 and the CPI is expected to rise modestly to 1.64%, according to the DGBAS.

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