The nation's economy is performing better than expected this year, the Taiwan Institute of Economic Research (TIER, 台經院) said yesterday as it revised upward its full-year economic growth forecast to 5.93 percent.
The private think tank in July predicted 5.67 percent growth for the nation's gross domestic product (GDP).
The economic outlook for next year, however, is expected to hover around 4.62 percent as a result of economic uncertainties such as fluctuating oil prices, rising interest rates and inflationary pressures, as well as China's move to slow its overheated economy, TIER said.
"Spurred by economic stimulus measures, private consumption and private investment have quickly rebounded and are expected to see 2.76 percent and 23.34 percent growth this year, respectively, which helps raise the GDP forecast," TIER president Wu Rong-i (吳榮義) said at a presentation yesterday.
Triggered by the global economic recovery and Taiwan's export and import strength, the nation's GDP expanded by 7.17 percent in the first half of the year, Wu said.
Growth momentum, however, slowed in the second half, and GDP may show 5.39 percent and 4.22 percent growth in the third and fourth quarters, respectively, he said.
TIER's GDP forecast is much rosier than those of other research institutes, but Wu said he expects them to make upward revisions soon.
The Directorate General of Budget, Accounting and Statistics (DGBAS) in August forecast 5.87 percent GDP growth for this year, and a 4.48 percent rate for next year, while the Chung-Hua Institution for Economic Research (中經院) in July projected 5.35 percent GDP growth this year and 4.44 percent next year.
On the currency front, TIER expects the NT dollar will continue to gain strength against the US dollar and the currency may further shoot up, depending on the Chinese yuan's future movement.
The US government's attitude will be key to the yuan's revaluation, said Kung Ming-hsin (
"Pressure [on China to let its currency appreciate] are likely to step up now that [George W] Bush won his re-election bid," Kung said.
But that kind of pressure may not surface until the second half of next year, after Bush re-arranges his new administration, he said.
The economics professor further said that the best scenario for China's and world economies is for Beijing to let its currency rise by 10 percent in one shot. This would have a limited impact on its domestic economy while effectively addressing its trade imbalance with the US, Kung said.
"In doing that, China will prevent hot money from flowing into the country to speculate on the yuan's incremental movements," Kung said.