TAIPEI (Taiwan News) – In the latest improved forecast, the Institute of Economics at the Academia Sinica said Wednesday (July 31) that Taiwan’s economy will grow by 3.88% this year, but inflation should not be underestimated.

The think tank’s previous prediction, made late last year, pegged gross domestic product (GDP) growth for 2024 at 3.02%. The new forecast was the result of growing exports on the back of the success of AI and high-performance computing (HPC) in combination with the recovery of global demand, per Radio Taiwan International.

Three factors of uncertainty to keep in mind during the second half of the year were interest rate decisions by the United States Federal Reserve, the Nov. 5 U.S. election, and the Chinese economy, economists said.

The Academia Sinica hike followed a trend set by other think tanks and the government over the past month. Recent forecasts ranged from 3.57% by the Taiwan Research Institute (TRI), 3.81% by the Chung-Hua Institution for Economic Research (CIER), and 3.85% by the Taiwan Institute of Economic Research (TIER), up to 3.94% by the government’s Directorate-General of Budget, Accounting and Statistics (DGBAS).

Despite the general optimism about Taiwan’s GDP, Academia Sinica warned that inflationary pressure during the latter part of 2024 should not be underestimated. The hike in electricity rates introduced in April, the impact of rising home prices on rents, planned wage hikes for government employees, and the influence of typhoon damage on food prices all need to be considered.