The nation's economic growth will slow to 4.2 percent next year, following a 5.41 percent increase this year, revised upward from an earlier estimate of 4.61 percent, a Taipei-based economic research team said yesterday.
Polaris Research Institute (寶華綜合經濟研究院) said it had raised its economic growth forecast for this year because of robust exports but that its GDP growth projection for next year was lower because of the negative impact of lower consumption in the US -- caused by the subprime crisis -- on the nation's future export growth.
"Next year, we may see a mild pick up in domestic demand, but that momentum won't be strong enough to offset the nation's declining export growth, impacted by the slowdown in the US," Liang Kuo-yuan (梁國源), president of the Taipei-based research institute, told a briefing yesterday.
The Polaris GDP forecast for next year was the second-lowest among the major domestic research institutes, compared with the government statistics agency's projection of 4.53 percent, the Taiwan Institute of Economic Research's (TIER, 台經院) 4.39 percent, Academia Sinica's projection of 4.31 percent and the Chunghua Institute for Economic Research's (CIER, 中經院) 4.16 percent.
Despite rising consumer prices, Liang said domestic demand would be bolstered by rising salaries, which saw 4.64 percent year-on-year growth in real terms in the first quarter of this year.
Polaris forecast that consumer price inflation would climb to 1.95 percent from this year's estimated 1.55 percent.
Liang said Polaris had a neutral view toward the shift of the nation's major export destinations from the US and Japan to China and ASEAN countries as demand picks up in emerging markets.
"I'm neither optimistic nor pessimistic," Liang said. "2008 will be a test year for the pickup of demand in emerging markets to see if it is solid."
Domestic private investment would remain stagnant with economic uncertainties dissuading investors from mulling capital expansion, the institute said.
As capital outflows continue, the Taiwan dollar is likely to remain weak against the greenback and is expected to average NT$32 to the US dollar next year, Liang said.
That was slightly lower than the estimated average from 20 other research institutes of NT$31.7.
"The return from NT dollar-denominated stocks and assets is among the worst-performing, which means local investors will continue to buy overseas assets," Liang said.
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