UBS raises forecast for nation’s GDP to expand 11 percent

UBS Group AG has again raised its GDP growth forecast for Taiwan, projecting the economy would expand 11 percent this year, up from its previous estimate of 9.9 percent growth. The upgrade came as the artificial intelligence (AI) boom continues to exceed expectations, and its impact broaden beyond the technology sector into exports, capital investment and domestic demand, UBS said yesterday. If realized, the growth rate would rank among Taiwan’s strongest performances in nearly four decades, UBS senior Asia economist William Deng (鄧維慎) said. Photo: Ritchie B. Tongo, EPA It is one of the most optimistic forecasts among major institutions. Deng said he expects second-quarter GDP growth, due to be released by the Directorate-General of Budget, Accounting and Statistics tomorrow, to remain above the double-digit level, with the economy maintaining momentum in the second half despite a higher comparison base. The latest forecast highlights continued strength in exports and business investment in Taiwan, Deng said. Record capital goods imports suggest companies are still expanding production capacity to meet surging AI-related demand, and UBS has yet to see signs that the investment cycle is losing momentum, he said. In addition, there is increasing evidence that the AI boom is spreading to the broader economy, with manufacturing activity in traditional industries, including metals and machinery, starting to recover after several weak quarters, while accelerating retail sales indicate that rising household income and wealth effects are supporting consumption, UBS said. An improving fiscal position, especially a surge in tax revenue, is providing another channel through which technology-driven growth can benefit the wider economy and give the government greater flexibility to support domestic demand, it said. Taiwan has recorded fiscal surpluses for two consecutive years, helped by its critical role in the global AI hardware supply chain. The government has already introduced two rounds of economy-wide cash handouts in the past few years, and lawmakers are reviewing another proposal this year that could further boost the spillover effects of AI-led growth on non-technology sectors, Deng said. The latest adjustment to the US tariff regime could also provide a modest boost to Taiwan’s export competitiveness, as Taiwanese products face a 10 percent tariff while maintaining existing exemptions, he said. By comparison, several other economies, including China, Japan and South Korea, face higher rates of 12.5 percent, he added. On inflation, UBS sees some upside risks to its 1.9 percent forecast, but expects government measures to help cushion the impact of higher energy prices. With housing price momentum remaining subdued, the central bank is likely to keep its policy rate unchanged in the near term, Deng said. Still, the persistence of inflation, shifts in global monetary policy and domestic financial stability conditions would remain key factors shaping the central bank’s future policy decisions, he added. TARGETS: Taiwan has consistently planned for all possible scenarios involving Chinese action against the country and developed contingency measures, a major general said The Ministry of National Defense yesterday said it is monitoring the construction of full-scale replicas of military and government sites in Taiwan by the Chinese People’s Liberation Army’s (PLA). The comments from ministry spokesman Major General Sun Li-fang (孫立方) come after a report by the Telegraph on satellite imagery showing replicas of Taiwan’s Presidential Office Building, Suao Naval Base and other sites. Citing satellite imagery and defense analysts, the report, published on Sunday, said that the PLA had built life-size replicas of key government facilities to rehearse military operations under realistic conditions. The report described the scale and specificity of the training SIDE-BY-SIDE: The US appreciates Taiwan’s partnership in maritime security and safety, and supports its strong contributions to global maritime law enforcement, the AIT said The American Institute in Taiwan (AIT) yesterday for the first time shared a photograph of Taiwanese and US coast guard vessels operating side-by-side, saying that the two sides conducted joint operations ranging from search-and-rescue to maritime law enforcement. The Coast Guard Administration (CGA) and the US Coast Guard are “coordinating shared objectives such as search and rescue, preparing for tropical storms, disaster relief, preserving maritime resources, countering illegal fishing, and interdicting illegal drug shipments at sea,” the AIT said on Facebook. “The US appreciates Taiwan’s partnership in maritime security and safety, and supports Taiwan’s meaningful contributions on global issues including maritime law PINGTUNG, TOO: The Yilan HSR line is to terminate at Nangang Station, while a line is to connect Kaohsiung’s Zuoying HSR Station to a planned station in Lioukuaitso Premier Cho Jung-tai (卓榮泰) yesterday officially approved a 60.6km extension of the high-speed rail (HSR) system to connect Taipei’s Nangang HSR Station with Yilan County, cutting travel time to about 28 minutes — a significant reduction compared with the Taiwan Railway Corp line. The project is expected to cost NT$352.175 billion (US$10.91 billion), with construction projected to be completed 11 years after final approval is received, or by 2037. The Yilan HSR line would run from the station in Nangang District (南港) through New Taipei City’s Sijhih (汐止), Pingsi (平溪), Shuangsi (雙溪) and Gongliao (貢寮) districts, before entering Yilan in Toucheng Township TAIWAN POSITIVE: The exempted products list, which includes many items critical to Taiwan’s economy, appeared to have been selected for the nation’s benefit, a group said Taiwan obtained US tariff exemptions for 2,231 products after Washington on Thursday declared a new round of excise taxes on 60 trade partners, officials said on Friday. The new tariffs imposed on countries that allegedly engage in forced labor were authorized under Section 301 of the US Trade Act of 1974. The measures were met with protests from Europe, Japan, China, Australia and New Zealand, saying the labor allegations were baseless. Taiwan achieved most-favored-nation status, so it had the lowest tariff rates among the four groups in the US sanctions regime, pays a non-cumulative 10 percent tariff and obtained exemptions for thousands of