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Economic growth forecast to rise: Polaris

Polaris Research Institute (寶華經濟研究院) yesterday raised its forecast for the nation's economic growth as measured by GDP from 4.2 percent to 4.35 percent this year, anticipating internal demand boosted by the Chinese Nationalist Party's (KMT) presidential victory on Saturday.

"Despite the sluggish global economy, the nation's GDP this year will be supported by an expected growing internal demand on the back of the newly elected government," president of Polaris Research Liang Kuo-yuan (梁國源) said yesterday at a press briefing.

Although the local economy will not see a significant improvement this year, if the new government improves administrative efficiency and cross-strait relations next year, the nation's GDP will continue to rise in the medium to long term, Liang said.

The institute added that an expected return this year of Tai-wanese businesspeople who have been based in China would help create new job opportunities, which would in turn help increase domestic consumption.

Nevertheless, with the slowing global economy and the appreciation of the NT dollar, the nation's export growth this year is expected to be slower than last year, Liang said.

Meanwhile, the nation is facing inflationary pressure with the core consumer price index (CPI) exceeding 2 percent for five consecutive months.

As commodity prices are expected to remain high for the first half of the year, the institute raised its CPI forecast this year from 1.95 percent to 2.3 percent.

Inflationary pressures may force the central bank to raise its rediscount rate by another 12.5 basis points when its board meets tomorrow.

However, Liang said that the central bank may decide to hold the rate unchanged as the government's statistics estimated the nation's CPI would increase 1.98 percent this year.

The institute forecasted the local currency exchange rate to average at NT$30 against the greenback this year.

"As the local currency's exchange rate averaged at NT$31.648 versus the US dollar between Jan. 2 and Mar. 24, we forecast the NT dollar will remain under pressure to rise," Liang said.
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