Taipei, Taiwan — Cathay Financial Holding Co., the largest financial group in Taiwan, has forecasted that the country’s Gross Domestic Product (GDP) will grow by 2.8% in 2025, maintaining its previous estimate from September. The forecast signals a more cautious outlook on the Taiwanese economy, with no immediate changes expected to the key interest rates set by the Central Bank of the Republic of China (Taiwan) in the near future.
Taiwan’s 2025 GDP Growth: Cathay’s Cautious Forecast
Cathay Financial’s 2.8% GDP growth forecast for 2025 aligns with their previous projections, reflecting cautious optimism regarding the local economy. While Taiwan’s economy remains resilient, the financial group’s forecast contrasts with more optimistic projections from other government bodies. For instance, the Directorate General of Budget, Accounting and Statistics (DGBAS) recently upgraded its forecast for Taiwan’s 2025 GDP growth to 3.29%, up from the previous 3.26%.
A Stronger 2024 Expected: Taiwan’s Economy to Grow 4.1%
For 2024, Cathay Financial has raised its GDP growth forecast to 4.1%, up from the previous 3.7% estimate made in September. The forecast reflects Taiwan’s robust economic performance this year, particularly driven by strong demand for semiconductors and electronics components, which are poised to continue fueling Taiwan’s exports and investments. In contrast, the DGBAS has projected a 4.27% growth for 2024.
Factors Driving Taiwan’s Economy: AI and Global Trade Risks
One key driver of Taiwan’s economy is the rapid rise of artificial intelligence (AI) applications. The growing global demand for AI-related semiconductors and electronic components is expected to boost Taiwan’s exports and investments in 2025. However, Cathay Financial also raised concerns about global trade tensions, particularly the potential impact of a new U.S. administration under President-elect Donald Trump. This could dampen investor confidence, hurt private consumption, and affect Taiwan’s stock market performance.
GDP Growth Range for 2025: A More Conservative Approach
Given these risks, Cathay Financial revised the range for Taiwan’s GDP growth in 2025 to 1.6-3.6%, slightly down from the previous 1.8-3.7%. However, the average forecast remains at 2.8%. This reflects both optimism for Taiwan’s tech-driven growth and caution due to global uncertainties.
Central Bank’s Monetary Policy: No Immediate Rate Changes
Cathay Financial also expects the Central Bank of the Republic of China to maintain its current monetary policy in the short term. The central bank is scheduled to meet on December 19, and analysts predict that it will hold interest rates steady for now. While global central banks, including the U.S. Federal Reserve, have entered a cycle of rate cuts, Taiwan’s central bank remains cautious due to persistent inflationary pressures from high service costs, particularly in housing, healthcare, and dining.
In June, Taiwan’s central bank kept its discount rate unchanged at 2%, marking the second consecutive quarter of steady rates. This rate is the highest in 15 years, with rates on accommodations with collateral set at 2.375% and 4.25% for accommodations without collateral.
Housing Market: Watch for Selective Credit Controls
As Taiwan’s housing market continues to experience high prices, market analysts are keeping a close eye on whether the Central Bank will introduce more selective credit controls in the coming months. These measures could curb excessive home price inflation and stabilize the real estate sector.
Taiwan’s GDP Forecast for 2024 and 2025: Summary Table
| Year | GDP Growth Forecast | Key Drivers |
|---|---|---|
| 2024 | 4.1% | Strong demand for semiconductors and electronics, resilient export growth |
| 2025 | 2.8% (average) | AI-driven tech growth, but global trade tensions and investor caution |
| 2025 Range | 1.6% – 3.6% | Adjusted forecast due to global economic risks and domestic factors |
Frequently Asked Questions (FAQs)
Q: What is Cathay Financial’s GDP growth forecast for 2025?
A: Cathay Financial forecasts Taiwan’s GDP to grow by 2.8% in 2025, based on current economic trends and global uncertainties.
Q: How does Cathay’s forecast compare with other predictions for 2025?
A: Cathay’s forecast of 2.8% is more cautious compared to the DGBAS’s forecast of 3.29% for the same year.
Q: What is driving Taiwan’s economic growth in 2025?
A: The rising demand for AI technologies and Taiwan’s strong semiconductor and electronics industries are key drivers of growth.
Q: Will Taiwan’s central bank raise interest rates in 2025?
A: Cathay Financial expects the Central Bank of Taiwan to keep interest rates unchanged in the short term due to stable inflation and high service costs.
Q: What risks could affect Taiwan’s economy in 2025?
A: Global trade tensions, particularly between the U.S. and China, could affect investor confidence, private consumption, and the stock market.
