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TIER raises GDP forecast

With better-than-expected domestic consumption and investment, the Taiwan Institute of Economic Research (TIER, 台經院) yesterday raised its economic growth forecast for the year.

The research institute now expects GDP growth to reach 3.51 percent, up from the 3.31 percent it forecast in July.

The Directorate General of Budget, Accounting and Statistics (DGBAS) estimates that domestic consumption will grow by 3.14 percent this year from the previously expected 2.97 percent, with its forecast for growth in domestic investment also rising, to 9.94 percent from 8.48 percent.

TIER's GDP forecast is still the lowest among all institutions despite the upward adjustment. Academia Sinica is the most optimistic, with an annual GDP growth forecast of 3.74 percent, followed by the DGBAS, which expects 3.65 percent growth and the Chung-hua Institution for Economic Research (CIER, 中經院) with 3.53 percent.

"Growth momentum, despite remaining slow, will extend into next year," TIER president David Hong (洪德生) said at a seminar yesterday.

TIER expects economic growth to rebound to 3.96 percent next year, supported by a steady recovery in the world economy.

Growth will occur in the EU, as institutions such as the IMF, the Organization for Economic Cooperation and Development and others predict economies in the region to strengthen by 0.2 percent to 1 percent next year, Hong said.

GDP growth in the world's two largest economies, the US and Japan, will remain at the same level as this year, while China's expansion is expected to decline slightly because of Beijing's macro-economic policy, Hong said.

Factors that may depress growth include rising oil prices and interest rates, as well as terrorist attacks, he said.

Domestically, although it would be difficult for export demand to rebound, given that most manufacturers have moved their production to China, Hong said Taiwan's trade surplus will improve next year, as imports of big-ticket items such as equipment to construct the nation's first high-speed rail will fall.

For the first 10 months of the year, Taiwan's trade surplus shrunk to US$3.47 billion, marking a 48.1 percent slump from the same period last year. For this year, TIER forecasts a trade surplus of US$5.8 billion, but expects this to bounce back to US$18.5 billion next year.

With oil prices having eased recently, TIER expects the consumer price index to rise by 2.43 percent this year, and decline to 1.66 percent next year.

Given slow growth, the New Taiwan dollar will stay around its current level, the institute said.

The NT dollar will trade at an average of NT$32.11 against the US dollar this year, and slide slightly to NT$32.74 next year, it added.
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