Introduction to Taiwan’s Economy
Taipei’s Central Bank has recently announced its forecast for the country’s economic growth, and the results are mixed. The bank has cut its forecast for growth in the consumer price index (CPI) for 2025, but has left its estimate of local gross domestic product (GDP) growth unchanged.
Forecast for Economic Growth
The Central Bank of the Republic of China (Taiwan) has forecast that the country’s GDP will grow at a rate of 3.05 percent in 2025. This forecast remains unchanged from previous predictions. However, the bank has cut its forecast for CPI growth to 1.81 percent, down from 1.89 percent. The bank has also cut its forecast for core CPI growth, which excludes fruit, vegetables, and energy, to 1.69 percent.
Factors Affecting Economic Growth
The bank’s forecast is based on several factors, including the expected slowdown in the increase in the cost of services and the likely fall in international crude oil prices in the second half of the year. Additionally, the bank expects the Taiwan dollar to continue to appreciate, making imports less expensive. However, the bank is also concerned about the uncertainties created by the Trump administration’s tariff policies, which could affect the global economy.
Impact of US Tariff Policies
The US President’s announcement of "reciprocal" tariffs on countries with high trade surpluses with the United States has created uncertainty in the global economy. Taiwan is one of the countries affected by these tariffs, with a 32 percent import duty on goods from Taiwan. Although the US President announced a 90-day pause on these tariffs, the bank is still concerned about the potential impact on Taiwan’s economy.
Effect on Exports and Investments
The 90-day pause on tariffs has led to an increase in exports and private investments in the first half of the year, as foreign buyers place orders ahead of schedule to avoid tariffs. However, the bank expects this pace to slow down in the second half of the year. The bank forecasts that Taiwan’s GDP will grow 5.49 percent in the first half of the year, but will slow down to 0.78 percent in the second half.
Comparison with Other Forecasts
The Central Bank’s forecast is similar to that of the Directorate General of Budget, Accounting and Statistics (DGBAS), which estimates that Taiwan’s GDP will grow 3.10 percent in 2025. The DGBAS also forecasts that Taiwan’s CPI will grow 1.88 percent this year.
Interest Rates and Housing Market
The Central Bank has decided to leave interest rates unchanged, citing the need to watch closely how US tariff policies evolve and how major central banks adjust their monetary policies. The bank’s governor, Yang Chin-long, stated that there is no immediate need to cut interest rates, as the local financial market is faced with tremendous uncertainties. The bank is also concerned about the potential impact of interest rate cuts on the housing market, which could lead to speculation and higher prices.
Housing Market Controls
The bank imposed selective credit controls on the housing market in September last year, which has led to a decline in home transactions and a moderation in housing price growth. The bank is monitoring the housing market closely and may impose complementary measures to ensure that speculation does not return.
Conclusion
In conclusion, the Central Bank of Taiwan has forecast a mixed economic outlook for the country, with a cut in CPI growth forecast but an unchanged GDP growth forecast. The bank is concerned about the uncertainties created by US tariff policies and is watching closely how the global economy evolves. The bank has also decided to leave interest rates unchanged and is monitoring the housing market closely to prevent speculation and higher prices. Overall, the bank’s forecast suggests that Taiwan’s economy will continue to grow, but at a slower pace than previously expected.
