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Economy

Taiwan cuts growth outlook to 2.27% as IT export loses shine

Smartphone slowdown on mainland and trade war expected to slow investment

The government in Taipei lowered its GDP forecast for 2019, but expects Taiwan's exports to rebound later in the year.   © Reuters

TAIPEI -- Taiwan downgraded its economic outlook for 2019 on Wednesday due to sluggish exports, projecting 2.27% growth in real gross domestic product for the island's slowest uptick in three years.

The forecast from the Executive Yuan falls 0.14 percentage point lower than a projection issued in November. Taiwan achieved 2.63% growth in 2018, and the island's potential growth rate is thought to be just below 3%.

Information-technology-related exports, a key driver of the economy, look poised to languish as a result of lackluster smartphone sales in mainland China and fallout from the trade war. Goods exports are forecast to edge up 0.19% this year, compared with a roughly 6% increase last year.

Capital investment and consumption are on track to take a bigger hit than expected.

Business inventories started rising noticeably in the second half of 2018. But, according to an official from a major semiconductor company, "piled-up inventories will be reduced to normal levels in mid-2019."

Taiwan's government expects that exports will regain momentum in the second half of 2019. But the potential for difficulties in U.S.-China trade talks makes a further slowdown possible.

The Taiwan Institute of Economic Research projects a more conservative rate of real GDP growth at 2.12%.

"Companies are losing investment appetite, and this will hamper the economy," said Gordon Sun at the think tank. "Pessimistic views are becoming widespread. It will take a long time for businesses to regain confidence in the economy."

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