Taipei, May 15 (CNA) Taiwan's gross domestic product (GDP) growth is likely to hit 5 percent over the next five to 10 years as domestic demand continues to rise, Taiwan Institute of Economic Research (TIER) President Chang Chien-yi said Wednesday.
On the sidelines of a TIER forum on the economic outlook in Asia, Chang said that the return of an increasing number of overseas-based Taiwanese companies will help increase domestic demand and drive economic growth.
In addition, the Taiwan government's efforts to invest more in infrastructure and develop the "5 plus 2" industries, such as semiconductor, green energy, biotechnology and smart machinery businesses, are creating a good foundation for economic reform, Chang said.
Even if the domestic economy is affected by a global slowdown over the next two to three years, it will turn around, registering 4-5 percent growth over the next five to 10 years on the back of solid domestic demand, he said.
According to Ministry of Economic Affairs (MOEA) data, 52 Taiwanese companies operating abroad have pledged this year to bring back NT$279.5 billion (US$8.99 billion) worth of investment amid worry over the trade tensions between China and the United States.
In January, the MOEA put forth an incentive package to encourage overseas-based Taiwanese companies, particularly those in China, to return home.
The incentives include better access to bank loans, a simplified process for recruiting migrant workers, and services tailored to the companies' needs.
According to the MOEA, the 52 firms already committed to returning are expected to create more than 27,000 new jobs in Taiwan. Their pledges have topped a goal set by the government to encourage NT$250 billion worth of investment by overseas-based Taiwanese companies, and on Thursday, the Cabinet raised the 2019 goal to NT$500 billion.
Commenting on the ripple effects of the current trade disputes between the U.S. and China, Chang said the U.S.' increased tariffs on Chinese goods could trigger imported inflation in the U.S. market and lead the Federal Reserve to raise its key interest rates in the second half of the year.
Higher interest rates in the U.S. would raise the value of the U.S. dollar, which in turn would prompt investors to move their funds out of non-greenback denominated assets, including the Taiwan dollar, he said.
On May 10, the U.S. raised tariffs on US$200 billion-worth of Chinese merchandise from 10 percent to 25 percent, as the trade talks between the two countries the previous day failed to produce an agreement.
On Monday, the U.S. Trade Representative office released a list of an additional of US$300 billion-worth of Chinese products that may be subject to the 25 percent tariff.
Chang said that due to the escalating trade tensions between the world's two biggest economies, the Asian region and the rest of the world is at risk.
In February, the Directorate General of Budget, Accounting and Statistics (DGBAS) lowered its growth forecast for Taiwan's 2019 GDP from 2.41 percent to 2.27 percent, citing weaker global demand. The DGBAS is scheduled to update its economic growth forecast on May 24