(Bloomberg) -- Taiwan raised its forecast for economic growth next year even though the return of US President-elect Donald Trump threatens to disrupt trade.
The economy is expected to expand 3.29% in 2025, according to an estimate released by the statistics bureau in Taipei on Friday. That compares with the previous prediction of 3.26%. Gross domestic production is expected to grow 4.27% in 2024, versus the earlier forecast of 3.9%.
Third quarter growth came in at 4.17% on year, compared to the government’s earlier estimate of 3.97%.
The looming return of Trump complicates the economic outlook for Taiwan, which counts China and the US as major trade partners. This week, Trump promised an additional 10% levy on Chinese goods in retribution for what he said was Beijing’s failure to stop the flow of drugs into the US.
When asked at a briefing how the president-elect’s polices might affect Taiwan, Tsai Hung-kun, deputy head of the statistics bureau, said that “if global trade volume decreases, that’s not favorable for us.”
However, he added that tax cuts could boost US demand and imports, “which could benefit Taiwan.”
Michelle Lam, greater China economist at Societe Generale SA, said that “if tariffs are targeted at selected countries, it should be manageable for Taiwan, and it may even benefit” as orders may be redirected to the archipelago. “But broad-based tariffs on the rest of world will hurt,” she added.
Taiwan has been one of the best-performing economies in Asia this year, driven by global demand for its high-tech products. AI leaders like Nvidia Corp., Microsoft Corp. and OpenAI are increasingly turning to the archipelago’s companies to fabricate their chips, build their servers and cool their devices.
That performance has allowed the central bank to keep its benchmark interest rate at the highest level in 16 years, raise the amount of funds banks must hold in reserve and roll out a range of curbs, all to cool a red-hot property market.
Taiwan is likely to hold rates steady in 2025 as it keeps its “focus on managing overall financial stability,” William Deng, Asia and China economist of UBS Investment Bank, wrote in a note on Monday.
The central bank will announce its next rate decision on Dec. 19.
(Updates with more details from statistics bureau.)
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