Fri, Jan 27, 2006 - Page 5 News List

TIER raises GDP forecast

STAFF WRITER

Taiwan's economy is expected to continue its steady expansion this year with GDP rising by 4.02 percent, up slightly from last year's 3.73 percent growth, a Taipei-based private think tank said in a report released yesterday.

The Taiwan Institute of Economic Research (TIER, 台經院) had originally forecast in November that GDP would rise by 3.96 percent this year, up from last year's original estimate of 3.51 percent growth.

The economy should post 4.4 percent growth in the first quarter of the year and 4.19 percent in the second on the back of stable private investments and a recovering export sector, TIER said in the report.

The institute expects interest rates and exchange rates to stabilize, while private investment will increase 4.09 percent and private consumption will grow 3.07 percent this year.

The export and import sectors will show respective annual increases of 9.38 percent and 3.87 percent this year, the institute forecast. The trade surplus will surge 138.47 percent to US$18.6 billion this year as a result, it said in the report.

As inflation remains under control, TIER expects the central bank will continue with interest rate hikes, raising the rediscount rate charged to commercial lenders to 2.47 percent from the current 2.25 percent.

As for the New Taiwan dollar's exchange rate against the US dollar, the institute expects the local currency to fluctuate slightly around the current range of NT$32.50 to NT$33.00. Yesterday the local currency dropped NT$0.015 to close at NT$31.985 against the greenback.

Meanwhile, given the nation's improved economic fundamentals, Taiwan should have the potential to achieve annual GDP growth of around 4.5 percent this year, the Council for Economic Planning and Development said earlier this week.

However, many Taiwanese companies continue to hold a cautious outlook on business, according to the institute's poll released yesterday.

The poll showed that 53.5 percent of local manufacturers felt that economic conditions last month remained at the same level as in November, down from 58.9 percent the previous month. About 21.6 percent of the respondents felt optimistic about business prospects last month, down from 22.8 percent in November.

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