August 16, 2019 / 10:10 AM / a month ago

UPDATE 1-Taiwan raises 2019 growth outlook, sees faster pace next year

* Taiwan raises 2019 GDP forecast to 2.46% from 2.19%

* Economy is forecast to expand 2.58% in 2020

* Govt sees stronger growth in H2 due to improved exports

By Yimou Lee and Jeanny Kao

TAIPEI, Aug 16 (Reuters) - Taiwan raised its 2019 economic growth forecast on Friday, with prospects lifted by more factories moving production to the island from China despite worries about slowing technology demand and the Sino-U.S. trade war.

The statistics agency raised its full-year outlook to 2.46% from 2.19% forecast in May.

In contrast to Taiwan, key regional exporters Hong Kong and Singapore have both cut their full-year economic growth forecasts amid mounting risks of recession.

Taiwan’s government projected full-year growth of 2.58% next year, in its first forecast for 2020.

The agency said returning production coming to Taiwan from China helped reduce some impact from the escalating trade war, lifting the island’s economic growth.

“Returning production from Taiwan manufacturers has a growing positive impact to exports,” it said, adding that demand for new technologies including 5G and artificial intelligence would also underpin growth.

“The momentum for export growth has obviously resumed and the second half would be stronger than the first half,” it said.

Gross domestic product (GDP) edged up 2.40% in the second quarter from a year earlier, marginally lower than a preliminary reading of 2.41%.

UNCERTAINTIES REMAIN

Lingering worries over the Sino-U.S. trade war and rising protectionism, including a dispute between Japan and South Korea, remain concerns for Taiwan’s trade-reliant economy.

Yuanta Securities economist Woods Chen said that while trade protectionism and geopolitical risks such as protests in Hong Kong remain a major uncertainty for Taiwan’s economic outlook, stable growth could be expected in the coming quarters.

“Helped by shift of orders (to Taiwan) and returning capital from Taiwan manufacturers amid the U.S.-Sino trade war, Taiwan’s GDP growth for this year and next year would be relatively strong compared to others in the region,” he said.

The government also predicted exports would decline 1.24% in 2019, slightly worse than a previous forecast for a 1.17% contraction and compared with a 5.9% expansion in 2018.

The downward revision, which the statistics agency attributed to easing inflation, came amid a surprising fall in Taiwan’s exports in July, hit by a slowdown in China, weakening global demand and impact from a yearlong trade conflict between the world’s two largest economies.

The government also nudged down its inflation estimate for 2019 to 0.67% from 0.71% previously.

Taiwan’s factories are a key part of the global supply chain for tech giants such as Apple Inc, and its manufacturers have suffered from trade war disruptions and sluggish global demand for hi-tech gadgets like smartphones.

Foxconn, which makes smartphones for Apple and other brands, reported 2.5% fall in second-quarter profit this week, as it faces even more challenging quarters ahead as Washington plans to impose additional tariffs on $300 billion of Chinese imports. (Additional reporting by Roger Tung; Editing by Jacqueline Wong)

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