Taiwan cuts 2024 GDP growth forecast despite rising AI demand

[August 16, 2024]  By Jeanny Kao and Faith Hung
 
TAIPEI (Reuters) -Taiwan's trade-driven economy is expected to grow at a slightly slower pace in 2024 than previously forecast, with exports weaker than projected, despite an AI boom that has boosted demand for tech products, the statistics office said on Friday. 

People sell products at their stall at a market in New Taipei City, Taiwan January 31, 2024. REUTERS/Ann Wang/File Photo

The revised but still positive outlook remains a testament to Taiwan's growing prominence in the global technology supply chain and reinforces the island's crucial role in catering to the increasing global demand for AI technologies.

Taiwan is a key link in the global technology supply chain for companies such as Apple Inc and Nvidia, and is home to the world's largest contract chipmaker, Taiwan Semiconductor Manufacturing Co Ltd (TSMC).

Gross domestic product is now expected to expand by 3.90% this year, the Directorate General of Budget, Accounting and Statistics said, lower than the 3.94% forecast it issued in May.

"Although there are reasons for uncertainty in the AI industry, such as the unknown schedule for high-end products to actually start shipping, and exactly how much growth we can expect to see in AI, among others, we maintain an overall positive outlook," Yu-tai Tsai, an official at the Directorate-General of Budget, Accounting and Statistics, told reporters.

And some analysts see a limited chance for the central bank to adjust interest rates.

"With economic performance shifting from strong to only mild growth, the central bank will not raise interest rates, but we can't presume it will follow the (U.S.) Fed's lead to cut rates," said Kevin Wang, an analyst at Taishin Securities Investment.

Central bank governor Yang Chin-long said in July that the bank had no imminent plans to cut interest rates. In its June meeting, the central bank left its benchmark discount rate at 2% as expected as the governor saw inflation trending down.

The discount rate has been at 2% since March.

The statistics agency now sees 2024 exports growing by 8.71% versus last year, down from 10.06% predicted earlier. In 2023, exports dropped by 9.8% year-on-year.

The statistics office forecast the 2025 consumer price index at 1.91%, which would be slightly below the central bank's 2% target as well as below the 2.17% forecast for this year.

(Reporting by Jeanny Kao and Faith Hung; Additional reporting by Roger Tung; Editing by Christina Fincher and Emelia Sithole-Matarise)

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