Taiwan, South Korea GDP growth forecasts raised by IMF amid brisk chip sales and strong US dollar
- The International Monetary Fund has forecast Taiwan’s gross domestic product will grow 3.3 per cent this year, up from a 3.2 per cent prediction in April
- The Washington-based institution forecast South Korea’s economy to grow 2.6 per cent, slightly higher than the 2.5 per cent figure cited half a year ago
Brisk global sales of semiconductors and weakening currencies against the US dollar have nudged 2022 economic growth forecasts higher for Asian tech manufacturers South Korea and Taiwan, analysts said on Wednesday.
The International Monetary Fund (IMF) on Tuesday forecast that Taiwan’s gross domestic product (GDP) will grow 3.3 per cent this year, up from a prediction of 3.2 per cent in April. For South Korea, the Washington-based institution forecast 2.6 per cent growth, slightly higher than the 2.5 per cent figure cited half a year ago.
Both East Asian economies will be buoyed by sales of chips to developers of 5G smartphones, modern vehicles like electric cars and high-powered computing devices, even as demand for more common consumer gear falters.
“This year semiconductors are not doing that bad,” said Tony Phoo, a Taipei-based economist with Standard Chartered Bank. “Korea is largely dominated by memory chips, and for everyday things from cars to washing machines it all comes down to memory chips.”
Contract chip maker Taiwan Semiconductor Manufacturing Co., often described as a bellwether for global demand in consumer electronics, posted NT$218.1 billion (US$6.8 billion) in August sales and NT$208.2 billion in sales the following month, both up by double-digit percentages over the same months last year.
Samsung Electronics, the chip making arm of South Korea’s largest conglomerate, said revenue for the July-September quarter should have firmed by 2.7 per cent year on year to 76 trillion won.
Depreciation of the Taiwan dollar and South Korean won against the US currency will also help boost the GDP of each economy, said Woods Chen, head of macroeconomics with Yuanta Securities Investment Consulting in Taipei.
Both Taiwan and South Korea rely heavily on exports, meaning their major companies have more money when converting US dollar proceeds from overseas back into local currencies.
“Your revenues will look pretty, and you could also say it’s an effect of inflation,” Chen said. “This has no relation to the fundamentals in Taiwan.”
But the IMF is less sanguine about economic prospects next year.
It revised down Taiwan’s 2023 growth forecast to 2.8 per cent and cut South Korea’s to 2.0 per cent. Both had been expected to grow at 2.9 per cent in April.
Inflation, the Russia-Ukraine war and lingering Covid-19 threats will pull down the world economy next year, the IMF said in its latest World Economic Outlook.
The global economy is expected to grow 3.2 per cent this year and 2.7 per cent in 2023.
About 4,200 Taiwanese companies operate in the mainland, and some sell to mainland consumers as well as re-exporting goods to other countries.
Indicators gauging export growth and manufacturing sentiment have already “deteriorated” in Northeast Asia, S&P Global Ratings said in its Economic Outlook Asia-Pacific Q4 2022.
South Korea and Taiwan are more exposed because their economies rely on world demand rather than domestic consumption.