Fri, Apr 27, 2007 - Page 12 News List

TIER increases growth forecast

CAUTIOUS Despite some optimistic news, a TIER researcher said consumer credit abuse was the most significant problem plaguing the economy


Bolstered by the nation's better-than-expected export performance, the Taiwan Institute of Economic Research (TIER, 台經院) yesterday raised its economic growth forecast to 4.09 percent this year, slightly up from the 4.07 percent forecast it made in January.

Unlike other research institutions that have recently attributed their upward revisions on GDP forecast to the nation's domestic sector, TIER yesterday pointed out that the recovery in domestic consumption for the first quarter was not as strong as expected.

"The sector is still plagued by the consumer credit abuse storm ? as it took South Korea three years to completely weather the problem, the influence on Taiwan's economy may last through next year," said Chen Miao (陳淼), a research fellow at TIER.

Against this backdrop, TIER revised its prediction for the growth rate of private consumption to 2.69 percent, down from the 2.83 percent forecast in January.

Exports are to increase by 9.67 percent on robust demand from China and other Asian economies, and imports are estimated to grow by 8.87 percent, with the trade surplus growing to US$21.59 billion, according to TIER's latest forecast, from US$21.32 billion last year.

To support the nation's economy, public enterprise investment will play another important role, which will see an increase of 5.58 percent this year, up from 3.03 percent growth the research institution previously estimated.

TIER also indicated that the NT dollar is under appreciation pressure, saying the local unit is likely to trade higher against the US dollar due to the vibrant economy in Asia.

The NT dollar is expected to rise to NT$32.75 per greenback by the year-end, according to TIER's forecast.

The local unit closed NT$0.024 lower at NT$33.216 yesterday in Taipei.

As for short-term money market interest rates, TIER said the central bank will be nurturing rates to stabilize consumer prices.

The interbank overnight call-loan rate, for instance, will rise slightly to 1.7956 percent from 1.73 percent, it said.

TIER predicted consumer prices would increase 2.19 percent because of high growth in the wholesale price index (WPI), which was 7.07 percent in the first quarter of the year.

The increase in WPI will be reflected in the consumer price index (CPI) in three to four months, meaning consumer prices will go up in the next quarter, Chen said.

The oil prices, hovering around US$60 to US$65 per barrel, will also push the CPI up this year, he said.

TIER also said a recent poll suggested local manufacturers will be cautiously optimistic about the economy for the next quarter.

About 44.9 percent of respondents said they were positive about the economic outlook, down form 55.1 percent in the last TIER survey. The bears accounted for 9.1 percent, down from 9.8 percent, the poll showed.

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