Taipei, July 14 (CNA) Singapore-based DBS Bank has left its forecast for Taiwan's gross domestic product (GDP) growth in 2018 unchanged at 2.8 percent, but warned trade friction between the United States and China could takes it toll on that growth rate.
In February, DBS raised its forecast of Taiwan's GDP growth for 2018 from 2.5 percent to 2.8 percent, and it said at a press conference Thursday that it has decided not to change the estimate at this time.
DBS remains more bullish on Taiwan's growth than the government. In May, the Directorate General of Budget, Accounting and Statistics (DGBAS) forecast 2.6 percent growth for the year.
DBS also predicted Taiwan's economy will grow 2.4 percent in 2019.
While the Singaporean bank has left its forecast unchanged, Ma Tieying, an economist with DBS Bank, said Taiwan's economy could face challenges from moderating export and industrial production growth and an increase in crude oil prices in the second half of the year.
In particular, Ma said that if trade protectionism escalates the rest of the year as trade friction between Washington and Beijing intensifies, it will be hard for Taiwan's economy to grow by 2 percent.
On Tuesday, the Trump administration released a list of US$200 billion in Chinese goods that could be hit with 10 percent tariffs, part of a U.S. strategy to retaliate for what it sees as China's longtime unfair trade practices.
The duties could take effect after public hearings are held at the end of August.
That would follow 25 percent tariffs imposed by the United States on US$34 billion worth of Chinese imports on July 6 and Beijing's immediate retaliation with duties on the same value of U.S. goods.
The U.S. is considering separate duties on a further US$16 billion in Chinese goods after a public hearing is held later this month.
With global trade friction on the rise, Ma said the disputes could erode GDP growth in the United States and China by 0.2-0.3 percentage points in 2018 and 0.5-0.6 percentage points in 2019.
For Taiwan, which has close business ties with both the U.S. and China, that could mean at least one percentage point less of GDP growth to below 2 percent.
Up to now, Washington's tariff lists have targeted clothing, shoes, television components and refrigerators as well as a few high-tech items from China, but they have omitted some high-profile products like mobile phones and computers, Ma said, leaving Taiwanese companies relatively unscathed.
But if trade tensions continue to rise and more consumer electronics made in China are affected, Taiwanese companies in China could feel a real adverse impact.
The economist said rising trade friction is expected to start slowing down the pace of Taiwan's export growth in the second half because Washington and Beijing are Taipei's top two trading partners.
In the first half of 2018, Taiwan's exports, which account for about 60 percent of the country's GDP, grew 10.9 percent from a year earlier to US$163.83 billion.
