TIER lowers economic growth forecast to 4.29 percent

The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday lowered its economic growth forecast for Taiwan from 4.39 percent to 4.29 percent in light of a slowdown in the global economy resulting from the US subprime crisis.

However, Chen Miao (陳淼), an associate research fellow at TIER, said there was no reason for pessimism, as China's robust growth could compensate for the slowdown in the US.

Chen said the impact of the subprime crisis was being borne mostly by certain financial institutions, rather than the public.

He cited the slight rebound in the US Conference Board Leading Index and University of Michigan Consumer Sentiment Index this month as evidence that consumption in the world's largest economy may not be as weak as expected.

"We are seeing mixed signals from the US economy," Chen said.

"Although the leading index is hinting at weak investment in capital spending and employment, there are signs that a weaker US dollar is boosting exports and thus narrowing the country's trade deficit," Chen said.

Although China's economic growth is expected to slow this year from the stellar 11.4 percent recorded last year, strong consumption, investment and exports will continue to provide momentum.

TIER also predicted steady but limited appreciation of the NT dollar against the greenback, which is expected to fluctuate between NT$31.90 and NT$32.50.

Based on falling prices for raw materials such as base metals and crude oil, TIER said the wholesale price index was likely to enjoy a meager increase of 1.17 percent this year as a result of a higher base last year and a stronger local currency.