2023 Taiwan Economic Forecast
2023 Taiwan Economic Forecast: A Revision—Resilient Consumption amid Weak Signs of Export Recovery
During the first half of 2023, major economies experienced the consequences of contractionary monetary policies to address inflation, resulting in a global economic slowdown and weakened demand. The ongoing inventory adjustment in the manufacturing sector negatively affected export orders and equipment investment in Taiwan. In the first quarter of 2023, the real GDP growth rate declined by 2.87%. Looking ahead, private consumption is expected to play a pivotal role in supporting economic growth in the second half of the year. External demand, however, remains constrained. As a result, we revise downward the projected real economic growth rate for 2023 to 1.56%.
In terms of monetary policy, the central bank has implemented a contractionary approach. The central bank raised three policy interest rates by 12.5 basis points. Over the first six months of the year, the annual growth rates of M1B and M2 were 2.60% and 6.71%, respectively. These growth rates are expected to slow down in 2023, compared to the approximately 7% in money supply in 2022. Specifically, M1B and M2 are projected to grow by 3.15% and 6.46%, respectively, in 2023.
Moving forward, the second half of 2023 is full of notable uncertainties and risks, associated with the ongoing global economic slowdown, which has a substantial impact on market demand. Key challenges include the complexities surrounding China’s economic recovery, the deferral effects on global consumption and investment caused by major economies’ implementation of contractionary monetary policies, and the potential fluctuations in commodity prices due to geopolitical risks. Considering all these factors, our forecast for real GDP growth has a 50% confidence interval of 0.52% to 2.76%. This wide range reflects the significant uncertainties at play and the potential for varying economic outcomes in the coming months.
