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TIER lowers its growth forecast

The Taiwan Institute of Economic Research (TIER, 台經院) yesterday revised its economic growth forecast for this year down to below 4 percent because of slowing private consumption and investment.

TIER predicted that GDP growth for this year would only reach 3.91 percent, down from the 4.02 percent figure it predicted in January.

TIER's figure contrasts with the figure from another research institution, the Chung-hua Institution for Economic Research (中經院), which announced on Tuesday it would raise its annual GDP growth forecast to 4.17, up from its previous prediction of 4.01 percent.

Surging oil prices and snowballing consumer debt incurred from credit and cash-advance card abuse are expected to shrink private consumption to growth of just 2.8 percent, down from the previous prediction of 3.07 percent, David Hong (洪德生), president of TIER, said yesterday.

The nation is safe from inflation for now, but with consumer prices up 1.35 percent for the first quarter of the year, people still need to brace for the impact of high oil prices, as well as the impending hike in utility rates.

Minister of Economic Affairs Morgan Hwang (黃營杉) said yesterday that the Taiwan Power Co (台電) will raise its electricity rates next month, without giving any precise figures.

TIER estimated that consumer prices would increase by 1.84 percent on average this year, based on an average oil price of US$60 to US$65 per barrel, and an average exchange rate of NT$31.893 between the New Taiwan dollar and the US dollar.

The appreciation of the local currency would continue to frustrate exporters, but would lower the costs of imported goods to help restrain consumer prices, Hong said.

Growth in private investment was expected to shrink from 4.09 percent in the prior forecast to 2.35 percent, as several investment projects were still waiting to pass environmental protection evaluation, Hong said.

Local manufacturers said they were more positive about the economy, pushing up the manufacturing index by 0.49 points from February to 126.05 last month, according to a poll released by TIER.

But high oil prices dampened optimism, as respondents who believed that the economy would improve during the next six months fell to 34.7 percent from the previous level of 58.5 percent, while those who said the economy would get worse increased to 16.1 percent from 7.6 percent, it said.
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