DGBAS cuts 2020 GDP forecast to 1.56%
By ECCT staff writers
Taiwan’s Directorate General of Budget, Accounting & Statistics (DGBAS) has cut its official 2020 forecast for Taiwan’s Gross Domestic Product (GDP) by 0.11 percentage points to 1.56%, following lower than expected growth in the first half of 2020.
According to an official press release, the DGBAS’s preliminary estimate of Taiwan’s real GDP contracted by 0.58% in the second quarter of 2020, compared to the same period of the previous year, while the year-on-year growth rate in the first quarter was revised to 2.20%.
In terms of the outlook for the rest of the year, the press release states that the global Covid-19 pandemic has caused severe impacts on economic activities around the world. However, Taiwan’s manufacturing activities have been less affected. Moreover, the high tech capacity expansion in response to the emerging demand for new technological applications, such as 5G and high performance computing (HPC), is supporting Taiwan’s export growth.
However, offset by weakened global demand, slumping raw material prices and fewer tourists, it is projected that real exports of goods and services will contract 2.74%. In addition, real private consumption is expected to contract 1.44%, mainly owing to the impact of Covid-19 on the travel expenditure abroad by residents, due to the border controls, although this will be partly offset by emerging e-commerce and stay-at-home demand. The government’s relief and stimulus measures are expected to encourage consumption sentiment and boost the domestic economy.
Real private fixed capital formation is forecast to grow by 2.41%, supported by the continuing investment in the semiconductor industry, reshoring of Taiwan’s overseas companies, 5G network construction, offshore wind energy, reconstruction of unsafe and old buildings, and urban renewal.
The DGBAS expects the economy to rebound in 2021 on the back of higher global trade and rising domestic production capacity, spurred by the continuing investment in semiconductor manufacturing and reshoring companies, which will support Taiwan’s export and investment growth. Combining the contribution from the domestic sector, as well as recovering consumption, DGBAS forecasts real GDP will grow by 3.92% in 2021.