Investment rate expected to hit 27-year high in 2022

The Directorate General of Budget, Accounting and Statistics (DGBAS) has said it expects Taiwan’s investment rate to hit a 27-year high in 2022, as local companies expand production and upgrade technologies.

According to DGBAS forecasts, Taiwan’s investment rate — the ratio of capital formation to gross domestic product (GDP) in a country — will experience 27.82 percent in 2022 from 26.96 percent in 2021. The estimated 2022 figure is the highest since 1995, when the ratio reached 28 percent.

The DGBAS said the local semiconductor industry had significantly driven the growth in local investments, as firms sought to maintain their lead over overseas competitors in high-end technology development, a move which has prompted many downstream manufacturers in the supply chain to invest in Taiwan.

One prominent investor is contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), which has forecast 2022 capital expenditure of US$36 billion, a cut from its earlier estimate of US$40 billion to US$44 billion amid short-term uncertainty.

The DGBAS added that the investment growth seen locally had been driven in large part by investors moving operations from China to Taiwan, lured by government subsidies and concerns over escalating trade tensions between Washington and Beijing.

In addition, the DGBAS said that the government had aggressively pushed for the development of renewable energy, such as solar energy and offshore wind power, to attract capital investment.

According to a recent report by the Investment Commission, foreign direct investment approved by the government for the first 10 months of this year soared 119.36 percent from a year earlier to reach US$11.56 percent.

The report said that most of this investment was made up of foreign renewable energy developers, including Denmark’s ├śrsted Wind Power TW Holding A/S, Netherlands-based NP Hai Long Holdings B.V. and the Denmark-based CI II Changfang K/S, pouring funds into offshore wind development.

Last week, the National Development Council reported that its October composite index of monitoring indicators, which reflects the current economic situation, rose one point from a month earlier to reach 18, while the index showed the local economy stayed in a sluggish state by flashing a “yellow-blue” light.

The DGBAS said the increase in the October index largely resulted from massive investments by semiconductor firms.

After the high growth in investments in 2022, the DGBAS said it expected the investment rate for 2023 to fall slightly to 27.68 percent as global demand weakens and the manufacturing sector implements inventory adjustments.

However, the DGBAS added that the 2023 ratio would reach its second-highest level since 1995, behind only 2022’s estimated 27.82 percent.

The DGBAS said it expected inventory adjustments faced by the exports-oriented manufacturing sector, which began in the second half of this year, to continue into next year.

As a result, the agency said it had lowered its private investment growth forecast for the fourth quarter of this year by 1.53 percentage points to 4.45 percent and also cut its forecast for the whole of 2023 by 0.39 percentage points to 3.04 percent.

Source: Focus Taiwan News Channel