Polaris Research Institute (
Domestic consumption, though hurt by the consumer credit default problem, is expected to increase 2.67 percent from last year due to an improving job market and salaries, the institute said in a report yesterday.
With the economy picking up this year, private investment is estimated to rise 3.6 percent from last year, the report said. Combining private consumption and investment, domestic demand makes up 47.7 percent of GDP, or 2.06 percentage points of economic growth this year, Polaris Research said.
The unemployment rate was 3.78 percent in April, down from 3.87 percent in March, the Directorate-General of Budget, Accounting and Statistics reported on May 22.
The export sector will also see steady growth this year, by 5.27 percent from last year, as the world economy accelerates, the Polaris report said.
Net exports will constitute 52.3 percent of GDP this year, or 2.26 percentage points of economic growth, it said.
The think tank said the economy could be hurt by rising oil prices, the possible appreciation of the NT dollar due to the weakening of the US greenback and rising interest rates.
The institute raised its consumer price index (CPI) forecast from 1.8 percent to 1.87 percent as the prices of raw materials hover at high levels. The government is trying to keep CPI within 2 percent this year to avoid inflation, but this may be hard to do as recent heavy rains have had a significant impact on produce prices.
Polaris Research's forecast is more optimistic than recent ones by Lehman Brothers and Deutsche Bank, both of whom slashed their GDP prediction from 5 percent to 4 percent.
In a report released on Monday Deutsche Bank said Taiwan's equity market has lost 11 percent over the past month, which was a reflection of the nation's slowing economy and political uncertainty.
It said the first quarter GDP growth rate of 4.9 percent was disappointingly slow and far below its forecast of 6.1 percent.
While Polaris Research said private sector contributions would increase, Deutsche Bank said private investment was "surprisingly weak," and consumer spending is slowing, as real hourly earnings have stayed at the same level since 2004.
Growth in real exports of goods and services in the first quarter was 8.3 percent, lower than the 9.3 percent from the previous quarter, Deutsche Bank said.
This sector will continue to slow down, as growth in the US, Taiwan's second-largest export destination, will weaken in the second half of the year, it said.
Lower GDP growth in the US means the US Federal Reserve will either hold interest rates where they are or raise them again at its meeting later this month, the Deutsche Bank report said.
Taiwan's central bank would likely follow its US counterpart's actions, it said.
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