Economic growth to be highest in 39 years: CIER

Taiwan’s economy is projected to grow at its fastest pace in 39 years this year, supported by robust domestic demand and exports, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.

The think tank raised its growth forecast to 12.16 percent for this year, up 1.81 percentage points from its forecast of 10.35 percent in July.

“This is a very strong year, with both domestic and external demand performing very well,” CIER president Lien Hsien-ming (連賢明) told reporters before the presentation, citing the Chinese-language Liberty Times (sister company of the Taipei Times).

Domestic demand is expected to contribute 55 percent to the overall projected annual growth, while net overseas demand would account for the remaining 45 percent, the institute said in its presentation.

Much of the economic momentum continues to be driven by vigorous demand for artificial intelligence (AI)-related products, which has supported robust export growth and stronger investment and consumer spending, it said.

CIER raised its economic growth forecast largely due to better-than-expected increase in domestic demand rather than exports.

In terms of domestic demand, global cloud service providers are continuing to expand capital expenditures, leading local manufacturers to increase capacity, Lien said.

That rise in capacity, combined with increased investment in automation by non-tech industries, led the institute to project that private investment would grow 10.77 percent this year, he said.

Private consumption is forecast to expand 4.94 percent, the think tank said.

The institute estimated third-quarter growth of 12.73 percent, followed by 8.2 percent in the fourth quarter as a higher base of comparison weighs on the year-on-year figure.

The fourth-quarter forecast was raised from July’s estimate of 6.04 percent. Taiwan recorded growth of 15.43 percent and 12.93 percent in the first and second quarters respectively, government data cited by the think tank showed.

CIER cited monetary policy changes in major economies, financial market movements, domestic investment, geopolitical risks and cross-strait relations as potential drags on Taiwan’s high-growth environment.

Inflation is forecast to rise 2.06 percent this year, slightly above its July estimate of 2.02 percent. Fourth-quarter inflation is expected to expand 2.42 percent from a year earlier.

For next year, the institute raised its growth forecast to 5.97 percent from 3.71 percent in July, buoyed by continued expansion at a more moderate pace.