Sat, Apr 17, 2010 - Page 12 News List

CIER raises economic growth forecast

STABLE EXPANSIONWhile the institute raised its full-year forecast to 4.99 percent, growth would start to trend down in the second quarter given a higher base last year


The Chung-Hua Institution for Economic Research (CIER, 中經院) yesterday revised upward its economic growth forecast for this year to nearly 5 percent, making it the highest estimate among all local economic think tanks.

With the global economy picking up momentum and steady growth in the nation’s exports and imports, the Taipei-based institute expected the economy to rise 4.99 percent this year. Its prior forecast, made in December, was 4.66 percent.

Wang Lee-rong (王儷容), director of the institute’s Center for Economic Forecasting, attributed the upward adjustment of the GDP forecast for this year chiefly to a forecast two-digit rebound in domestic investment in the second half of this year.

“Taiwan’s economic growth momentum is shifting to internal demand in the second half of the year, with domestic investment expected to rise 10.96 percent, marking the second highest increase since 1992,” Wang told a media briefing.

GDP growth projections for this year by other local think tanks include Taiwan Institute of Economic Research’s (台經院) 4.81 percent, Academia Sinica’s 4.73, Polaris Research Institute’s (寶華經濟研究院) 4.72 percent and Taiwan Research Institute’s (台綜院) 4.45 percent.

Wang said given a higher comparison base from the second quarter of last year, quarterly economic growth would see a downward trend.

CIER predicted the economy would grow 9.27 percent in the first quarter, 6.55 percent in the second quarter, 4.01 percent in the third quarter and 1.08 percent in the final quarter.

Asked for comments on the draft industrial innovation act (產業創新條例) to lower the business income tax rate to 17 percent, Wang said the tax cut would increase public debt and force the government to reduce expenses for public construction, which could derail the economic recovery.

She described the proposed tax reduction as “adding insult to injury,” referring to the soaring national debt.

If the legislature approves the measure, “GDP growth forecast for this year would be revised downward to 4.08 percent,” she said.

CIER was less optimistic about the domestic labor market, forecasting that unemployment would remain as high as 5.5 percent this year. That contrasts with the Cabinet’s goal of reducing unemployment to below 5 percent by the end of this year.

Consumer prices are forecast to grow moderately, with inflation rising 1.71 percent this year and 1.76 percent next year, CIER said.

The NT dollar is expected to continue its recent appreciation against the US dollar given its strong link to the Chinese yuan, Wang said, adding that mounting international pressure on the yuan to revalue would prompt the NT dollar to appreciate.

“But China has many policy instruments in dealing with its exchange rates, so the Chinese currency is unlikely to skyrocket,” she said.

The yuan’s appreciation would not get “out of control,” she said.

CIER predicted that the NT dollar would average around NT$31.29 against the greenback this year, up 5.35 percent from a year ago, when the local currency traded at NT$33.06 on average.

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