Speaking at the 2020 Economic Investment Forum on Thursday, Yuanta-Polaris President Liang Kuo-yuan (梁國源) said that Taiwan’s economy will likely show weaker growth than the global economy next year.
The forum, hosted by UDN, gathered economists from regional think-tanks to discuss the economic outlook for the coming year.
Liang noted that the US Federal Reserve decision on Wednesday to leave rates unchanged is a sign of optimism in the US economy, which bodes well for the world economy to start the year. The Fed is expected to keep rates unchanged in 2020 as well. He added that while US interest rates are likely to remain unchanged next year, it would be impossible to raise them until 2021 or 2022. Liang was cautious, however, as he mentioned there are three scenarios in 2020 ranging from a smooth progression to an economic downturn. Much of the uncertainty surrounding the direction of the global economy depends on the unpredictability of US President Donald Trump and the continuing trade war with China.
Turning to Taiwan, Liang noted that the economic climate will remain either flat or decline in 2020. There is a much lower possibility that the local economy will improve next year, he added.
He stated that declines in exports to China have been offset by increased exports to the US this year. If Taiwan can maintain its exports to the US while also experiencing a return to previous export levels to China, the local economy would grow in 2020.
Liang mentioned that the US-China trade war has seen Taiwanese businesses’ return on investments exceed expectations in 2019, and that it would be difficult to match the current growth for another year. Taiwan has benefited from re-orders due to the tariffs imposed on products from China to the US. Additionally, a successful trade negotiation between the major economies would likely see orders for high-tech products return to China, negatively impacting the Taiwanese economy. The reversal of the order transfer that Taiwan has experienced poses the greatest risk to the economy.
Chung-Hua Institution for Economic Research (CIER) President Chen Shikuan (陳思寬) said that interest rates will remain low over the next year barring any major changes to the global economy. Chen sees the greatest risks in the next year from the US-China trade war as well as China’s slowing economic growth. He added that corporate debt is high and many companies will not be able to repay those debts in the event of a recession. Additional risks in the next year include protests, such as the ones in Hong Kong and South America, and climate change.