CIER slashes growth forecast again

The Chung-Hua Institution for Economic Research (CIER, 中經院) yesterday slashed for the second time its forecast for the nation's economic growth this year to 3.80 percent, down from the previous estimate of 4.05 percent, on the surprisingly weak performance of the economy in the first quarter.

"The economic climate has been changing rapidly, with the price of crude oil unexpectedly shooting above US$60 per barrel and the nation's much weaker than expected economic performance," CIER president Chen Tien-jy (陳添枝) told a press conference yesterday.

The nation reported lower-than-expected GDP growth of 2.54 percent in the first quarter, according to the Directorate General of Budget, Accounting and Statistics (DGBAS).

CIER attributed the weaker economic growth to the nation's lackluster trade performance and slowing private investment and consumption. Private investment is estimated to grow at a rate of 8.77 percent this year, compared with 28.2 percent last year.

Annual export growth is expected to slow to 3.41 percent this year, compared with a growth rate of 15.27 percent last year, as a result of the decelerating global economic growth rate, the institute said.

CIER's downward adjustment of its GDP outlook came after the Academia Sinica last month cut its forecast for this year's GDP growth to 3.74 percent from 4.05 percent. The DGBAS slashed its prediction to 3.63 percent from 4.21 percent in May.

However, CIER seemed optimistic about the nation's economic outlook in the quarters to come.

Chou Ji (周濟), director of CIER's center for economic forecasting, said that the economy bottomed out in the first quarter and then rebounded in the second, with GDP growth rising to 3.99 percent, as the nation saw improved export growth for the quarter, while manufacturers had almost digested their inventories.

The upturn is expected to continue with GDP growth reaching 4.03 percent in the current quarter and 4.61 percent in the fourth quarter, as exports pick up the pace with a growth rate of 4.42 percent in the second half of the year, combined with a flattening import growth rate of 1.96 percent over the same period, Chou said.

Cheng Cheng-mount (鄭貞茂), chief economist of Citigroup in Taipei, who was present at the briefing, said that the US bank believed Taiwan's economy hit the bottom in the first quarter and has since started to recover.

Domestic demand, however, will become the major driver of the nation's economic growth in the second half of this year, as the likely economic slowdown in the US and China could affect the nation's exports, Cheng said.

Citigroup projected GDP growth of 3.6 percent for Taiwan this year, he said.

Nevertheless, Liang Kuo-yuan (梁國源), president of the Taipei-based Polaris Research Institute, appeared to be less bullish about the nation's economic outlook.

Liang predicted that economic growth would not stop decelerating until the third quarter of this year on concern over unpredictable oil prices.

Polaris forecast a GDP growth rate of 3.62 percent for this year.

Earlier in the week, the Cabinet announced that it would still aim for 4.51 percent economic growth this year by offering a range of stimuli, including increased spending on infrastructure, promoting tourism and improving the investment environment.