A strong exports market is helping to keep Taiwan's economy on track, and while this year's performance looks set to come out weak, the island is on track to perform better next year.
Taiwan's statistics office, the directorate-general of budget, accounting and statistics, cut its GDP forecast for this year to 1.05 per cent from the previous estimate of 1.66 per cent, and said it expected the economy to expand by 3.09 per cent next year. This is down on a previous forecast of 3.67 per cent expansion, but still a solid performance.
Morgan Stanley's forecasts are more or less in line with that assessment, stating Taiwan's economy may expand 2.9 per cent next year from an estimated 1.2 per cent growth this year on the back of better exports.
"We expect Taiwan's GDP to rise 2.9 per cent next year, with exports the main driver amid a better global macro economic backdrop," Sharon Lam, a Morgan Stanley economist, said in the report. "Exports to the advanced economies, particularly the EU, may continue to underperform given the tough economic situation there."
Taiwan is heavily dependent on its exports, and goods sold overseas are predicted to grow 8 per cent next year, from a forecast contraction of 2.5 per cent this year.
Although divided since the Kuomintang fled the mainland at the end of a bitter civil war in 1949, China and Taiwan are becoming ever closer under Ma Ying-jeou, the president. Taiwan is increasingly reliant on business with mainland China, while just over half of its exports go to the United States, Japan and Europe.
Data for last month showed exports rose 3.2 per cent year-on-year, boosted by new technology products such as smartphones, tablet computers and laptops.
Electronic goods assembly, contract manufacturing and other elements of the supply chain have been crucial to Taiwan's economy.
Export orders were US$38.38 billion (Dh140.97bn) last month, a 1.9 per cent increase month on month, boosted by a rise in orders for new tech products. The value of orders for electronic products last month reached a record $8.95bn.
Companies such as Hon Hai, which is the parent company of the electronics manufacturing giant Foxconn, are major components in Taiwan's economic fortunes.
One of the country's leading think tanks, the Taiwan Institute of Economic Research, is forecasting GDP growth for next year of 3.42 per cent, based on a recovery in overseas markets.
The research institute has forecast that private investment is likely to grow 3.41 per cent and private consumption could rise 2.9 per cent from this year.
For this year, it expects growth of 1.16 per cent, reduced from an earlier estimate of 2.41 per cent in July.