Polaris Research Institute (寶華綜合經濟研究院) adjusted its GDP forecast for Taiwan next year to 4.57 percent yesterday, up from its previous estimate of 4.10 percent and higher than the Directorate-General of Budget, Accounting and Statistics’ (DGBAS) prediction of 4.39 percent.
The Taipei-based institute said the economy is expected to return to normal next year because the global economy is recovering and exports to China, which drive both internal and external demand, are expanding.
“The upward adjustment is a result of the lower base period, an Asian-led global economic recovery and the increasing inventory buildup,” Polaris president Liang Kuo-yuan (梁國源) told a press conference.
The institute said economic growth this year would contract by 2.47 percent from last year, compared to DGBAS’ Nov. 26 estimate of a 2.53 percent decline. Liang also shrugged off market concerns over the possibility of a double-dip recession next year.
“It is almost impossible for that to happen [a double dip] in the first half of next year, although a cautious observation is needed for the second half of the year,” he said.
Taiwan tumbled into its worst recession since 2001 in the fourth quarter of last year after the nation reported a decline of 7.11 percent in GDP following a drop of 0.80 percent in the previous quarter.
The economy has gradually come out of the recession in the second half of the year, after the GDP showed a decline of 1.29 percent in the third quarter following declines of 6.85 percent and 9.06 percent respectively in the preceding quarters.
The institute’s data showed that the inventory-output ratio continued to fall for the third consecutive quarter to 0.32, nearing the long-term average ratio of 0.31 between 2000 and this year. This indicates that inventory run-down is coming to an end as demand increases amid accelerated economic growth.
While the economic prospects next year are upbeat, Liang said there are three major risks facing the recovering global economy, namely asset bubbles, the slower-than-expected recovery in the US and EU, as well as risks regarding governments’ rapid withdrawl of economic stimulus measures.
Asked to comment on the impact of an economic pact with China, Liang said that “the inking of an ECFA [economic cooperation framework agreement] will not produce an immediate outcome for the nation’s economy next year,” adding that what the agreement will include was still uncertain.
The institute also forecast that the consumer price index (CPI) in the fourth quarter would decline 1.09 percent and that the CPI for next year will see an increase of 1.10 percent.
With the increasing prices of international products, the CPI has reported a steady change compared with the precipitous declines in the same period last year, Liang said.
In terms of the exchange rate for the New Taiwan dollar against the US dollar, the institute adjusted its forecast to NT$31.8 versus the greenback next year and retained its average estimate of NT$33.0 for this year.
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