Introduction:
Taiwan’s Central Bank has raised its GDP growth forecast for 2025 to 3.13%, up from the previous estimate of 3.08%. This revision follows the completion of the bank’s quarterly policymaking meeting. The central bank highlighted global demand for emerging technologies, such as artificial intelligence (AI), as a key factor driving the economic growth, alongside increased private consumption due to government salary hikes.
Details of Taiwan’s Economic Outlook:
Taiwan’s GDP Growth Forecast for 2025
In a statement on Thursday, the Central Bank of the Republic of China (Taiwan) explained that the 2025 GDP growth forecast had been revised to 3.13%. The forecast upgrade stems from several factors, including sustained global demand for Taiwan’s tech exports, particularly in AI applications, which are expected to bolster the country’s economy.
The government’s decision to raise wages for civil servants, teachers, and military personnel is also anticipated to spur private consumption, another important contributor to Taiwan’s economic growth.
Economic Outlook for 2024
The central bank has also raised its GDP growth forecast for 2024, from the previously expected 3.82% to 4.25%. This revision comes as exports and private consumption increase, while capital equipment imports support the manufacturing sector’s expansion. The Directorate General of Budget, Accounting, and Statistics (DGBAS) also forecasted Taiwan’s GDP growth at 4.27% for 2024, aligning closely with the central bank’s projection.
Inflation Forecast and Key Interest Rates:
Consumer Price Index (CPI) and Core CPI Projections
Taiwan’s Central Bank has projected a 2.18% CPI growth for 2024, slightly higher than its previous estimate of 2.16%. This change reflects the spike in food prices, especially fruits and vegetables. Core CPI, which excludes energy and food prices, is expected to grow at a lower rate of 1.90%, down from the earlier estimate of 1.94%.
Looking ahead to 2025, the central bank expects CPI growth to moderate to 1.89%, with core CPI increasing by 1.79%, unchanged from previous projections.
Interest Rates and Monetary Policy
Despite a recent 25-basis-point rate cut by the U.S. Federal Reserve, Taiwan’s Central Bank chose to keep its key interest rates unchanged for the third consecutive quarter. The discount rate remains at 2%, the highest in 15 years, with rates on collateralized and non-collateralized loans set at 2.375% and 4.25%, respectively.
The Central Bank stated that inflation remains above the 2% alert level, which justified maintaining the current interest rate policy.
Housing Market and Credit Controls:
Continued Monitoring of the Housing Market
While the Central Bank has refrained from introducing new selective credit controls on the housing market, it remains vigilant in monitoring the effects of measures previously imposed in September. Central Bank Governor Yang Chin-long indicated that the latest round of credit controls had helped dampen market expectations regarding housing price growth.
Despite these efforts, some banks were found to have extended mortgage loans by disguising them as other types of lending. The Central Bank has vowed to tighten its oversight to prevent circumvention of mortgage lending limits.
Reactions from the Property Market
Research manager Tseng Ching-der from Sinyi Realty Inc. commented that the lack of new credit controls could provide some relief to the property market. However, he noted that lending conditions remain tight, especially as the credit measures continue to affect home buyers. Tseng indicated that the market’s reaction in the upcoming traditional peak season in March will be crucial in assessing the impact of the current policies.
Table: Key Economic Forecasts and Projections
| Indicator | 2024 Forecast | 2025 Forecast |
|---|---|---|
| GDP Growth | 4.25% | 3.13% |
| CPI Growth | 2.18% | 1.89% |
| Core CPI Growth | 1.90% | 1.79% |
| Key Interest Rate (Discount) | 2.00% | 2.00% |
| Mortgage Lending (as % of Total Lending) | 37.4% (as of November 2023) | N/A |
Frequently Asked Questions (FAQs):
1. Why did Taiwan’s Central Bank raise the GDP growth forecast for 2025?
The Central Bank revised the 2025 GDP growth forecast to 3.13% due to solid global demand for emerging technologies like AI and the expected increase in private consumption, thanks to government wage hikes for civil servants and other personnel.
2. What is the GDP growth forecast for Taiwan in 2024?
The Central Bank has raised its GDP growth forecast for 2024 to 4.25%, reflecting higher exports, private consumption, and imports of capital equipment for manufacturers.
3. What are the inflation projections for 2024 and 2025?
The Central Bank forecasts a CPI growth of 2.18% in 2024 and 1.89% in 2025. Core CPI growth is expected to moderate, with estimates of 1.90% in 2024 and 1.79% in 2025.
4. Why has Taiwan’s Central Bank kept interest rates unchanged?
The Central Bank maintained the interest rates due to inflation remaining above the 2% alert level, despite a rate cut by the U.S. Federal Reserve. The current rates are intended to curb inflation and maintain economic stability.
5. How is the Central Bank addressing the housing market?
The Central Bank continues to monitor the housing market closely. While no new credit controls were introduced, the bank has intensified its oversight on mortgage lending to prevent circumvention of existing measures.
Conclusion:
Taiwan’s Central Bank has provided an optimistic outlook for the country’s economy in 2024 and 2025, with GDP growth expected to be supported by technological advancements and increased private consumption. Despite concerns over inflation and housing market dynamics, the bank’s decisions on interest rates and credit controls are geared towards ensuring long-term economic stability. As global markets and local consumption continue to evolve, Taiwan’s economic policies will remain under close scrutiny in the coming months.
