Polaris says economy will grow by 4.18% next year

With domestic consumption remaining the major driving force, the nation's economy is forecast to expand by 4.18 percent next year, according to a report released by the Polaris Research Institute (寶華綜合經濟研究院) yesterday.

The government's Directorate General of Budget, Accounting and Statistics last month predicted economic growth for next year, gauged by GDP growth, at 4.08 percent, while the Cabinet-level Council for Economic Planning and Development (CEPD) said earlier this month that economic growth next year will be 4.5 percent.

The nation's GDP ratio this year is predicted to be 3.8 percent, lower than the original goal of 4 percent, the CEPD said on Wednesday. The council attributed the failure to reach the goal to weaker-than-expected exports in the first half of the year, resulting in only 2.73 percent economic growth in the first six months.

Economic growth in the latter half of the year should climb to 4.83 percent, according to the council.

Polaris observed that as the unemployment rate remains higher than 4 percent and the inflation rate dwarfs salary growth, domestic consumption is less likely to drastically increase, although it is expected to climb by 3.18 percent next year, up from 3.15 percent this year.

As for the CEPD, the jobless rate should be 4.1 percent this year in the wake of various job-creation programs promoted by the government.

Meanwhile, consumer price hikes could contract from this year's estimated 2.3 percent to 1.42 percent next year as global oil prices stabilize, Polaris said.

The CEPD on Wednesday predicted that the consumer price index would reach 2.23 percent this year, up from its previous estimate of 2 percent, because of soaring oil prices as well as the the sharp increase in fruit and vegetable prices. The figure is expected to stay under 2 percent next year, the council added.

Polaris yesterday said that global economic growth in the coming year should maintain similar momentum with trade activities expanding mildly. In addition, the New Taiwan dollar's depreciation against the US dollar in the latter half of the year is conducive to the nation's exports.

A weakening NT dollar will make Taiwanese products less expensive in overseas markets, helping local exporters to compete with their Asian counterparts.

Therefore, Polaris estimated that the nation's GDP growth in the fourth quarter should extend the rebound trend to reach 5.18 percent, leading whole year growth to 3.77 percent.

However, as the US Federal Reserve hinted its interest rate hike is coming to an end and the IMF predicted that the US' current account deficit this year could reach US$759 billion with no sign of improving, Polaris said that the competitiveness of Taiwan's exports could be weakened if the US dollar adopts a reverse trend.