By Faith Hung and Emily Chan
TAIPEI (Reuters) - Taiwan's trade-reliant economy is expected to grow at a faster pace in 2024 than previously forecast, owing to high demand for artificial intelligence (AI) applications abroad and solid consumption at home, the statistics office said on Thursday.
Taiwan is a key link in the global technology supply chain for companies such as Apple Inc (NASDAQ:AAPL) and Nvidia, and is home to the world's largest contract chipmaker, Taiwan Semiconductor Manufacturing Co Ltd (TSMC).
Taiwan's gross domestic product this year is now expected to be 3.94% higher than last year, the Directorate General of Budget, Accounting and Statistics said, revising upward the 3.43% forecast it issued in February.
"The higher forecast is mainly because of substantial exports," the agency told reporters. "The key factor is AI, which is developing very fast."
Exports of electronic components, information and telecommunications and video and audio products hit $95.1 billion from January to April, rising 25.1% year-on-year, it said.
Exports in April rose for the sixth consecutive month, and may gain more momentum approaching the traditionally strong second half of the year, which bodes well for the island's economic growth amid booming demand.
The statistics agency now sees 2024 exports growing by 10.06% versus last year, up from 6.14% predicted earlier. In 2023, exports dropped by 9.8% year-on-year.
"The robust global semiconductor cycle is positive for Taiwan's growth outlook... Local consumption is equity-linked. The strong performance of the stock market generates positive wealth effect and backs retail sales," ANZ said in a report this week.
The agency also nudged up the 2024 consumer price index (CPI) forecast from 1.85% previously to 2.07%. That is slightly above the central bank's 2% target.
"Lower inflation allows the CBC (central bank) to keep rates through 2024," the ANZ report said.
The central bank holds its next rate-setting meeting in June, having unexpectedly raised the benchmark rate at its last meeting in March on inflation concerns.
In the first quarter, the economy expanded 6.56% from a year earlier, the agency said, revising slightly higher a preliminary 6.51% reading, its fastest quarterly pace since the second quarter of 2021 when it grew by 8.07%.