TIER Forecasts Taiwan's Economic Growth at 3.44% for 2014 and 3.48% for 2015

Taiwan Institute of Economic Research (TIER), Taiwan's major economic think tank, recently raised its forecast for Taiwan's economic growth this year to 3.44% and predicts 2015 growth to be 3.48%.

M. T. Sun, director of the Macroeconomic Forecasting Center of TIER, says Taiwan will see stable economic climate in 2015, but with four uncertainties that could be influential: moves by the U.S. Federal Reserve as raising interest rate, further radical actions by the ISIS or Islamic State of Iraq and Syria, supply chains in China that will inevitably change according to its own economic development and global demand for its exports, and further downtrends in oil prices.

Sun says that this year Taiwan's economic situation has improved due to higher employment, rising incoming tourists especially from China, and bullish stock market that has seen some predict the index to eclipse 9,500 or higher by the end of 2014, all of which have triggered considerable domestic demand to result in higher retail revenue and more licensing of new cars.

However and as in the past, Taiwan's export-driven economy in 2015 will depend on  China, EU and Japan, whose market dynamics will be influenced by as yet undecided  U.S. Fed's interest rate hike; while Mid-Eastern stability will hinge on ISIS to some degree and the Ebola virus to undoubtedly pressure major global economies to divert more resources for effective containment to ease tensions in Africa. Besides, Taiwan will continue to be impacted by localization of supply chains in China, which in recent years has fully localized supply chains of steel & iron, petrochemicals, and LCD panels.

However Taiwan stands to gain by the recent oil price drop. With annual purchase of about US$30 billion a year and price decline of  25%, Taiwan is estimated to save more than US$8 billion in 2015 that will account for 1.8% of the island's GDP for the year, Sun says. (JL)