Tue, Sep 21, 2010 - Page 12 News List

Economy to rise 8.52%: Polaris

GROWTH SIGNS The institute raised its GDP growth forecast for this year amid strong exports, increased domestic spending, rising employment and improving real income

By Ted Yang  /  STAFF REPORTER

Taiwan’s economy could expand 8.52 percent from a year ago this year on the back of stronger-than-expected exports and increasing domestic demand, Polaris Research Institute (寶華綜合經濟研究院) said yesterday.

This compares with the government’s forecast of 8.24 percent growth this year.

However, the Taipei-based institute warned that soaring global bond prices were increasing the risk of a double dip recession in the US and Europe, which may overshadow the global economic outlook next year.

Polaris raised its GDP growth forecast for Taiwan this year from its previous estimate of 6.82 percent in June, anticipating a 7.62 percent gain in the third quarter and 1.69 percent growth in the fourth quarter — the most optimistic among local think tanks.

The Chung-hua Institution for Economic Research (中經院) predicted in July that Taiwan’s economy would grow 6.94 percent, while Academia Sinica anticipated a 6.89 percent gain, data showed.

“Exports growth momentum was stronger than expected. In the first eight months of this year, exports returned to the pre-crisis levels in the same period of 2008,” Polaris president Liang Kuo-yuan (梁國源) told a media briefing.

Ministry of Finance statistics showed that exports reached US$22.6 billion in the first eight months, compared with US$15.6 billion recorded in the same period last year, with shipments to China and Japan hitting record highs.

Liang also attributed the robust growth prediction to recovering domestic spending, as retail revenues rose to NT$284.4 billion (US$8.98 billion) in the first seven months, up from NT$266.4 billion in the same period last year, adding that unemployment and real income were continuing to improve.

After this year’s bullish growth, Polaris anticipated a slower expansion of 4.53 percent year-on-year for Taiwan next year, which is lower than the government’s estimate of 4.64 percent, due to an easing of global economic growth.

“Unemployment rates in the US and Europe have remained at high levels, which might contrain their spending growth,” Liang said. “Whether emerging countries will be able to continue to serve as the main drive for global economic growth also remains uncertain.”

Polaris said the international financial market was at risk because the current bubble in the bond market was similar to the dot.com bubble in 2000. If the bond bubble bursts, it could cause major turbulence in the market, and thus impact on Taiwan.

“There is a 50 percent chance that the bubble will burst,” Liang told reporters on the sidelines of the press conference, noting that the US and European markets could see a double dip recession if that did happen.

The value of the New Taiwan dollar is expected to average NT$31.80 against the greenback for the full year and NT$31.30 for next year, Polaris said, adding that the local currency has room for appreciation as the recent exchange rate index is still lower than the 36-month moving average.

Asked whether the central bank would raise its policy rates at its quarterly board meeting next week, Liang said that it might hike rates by another 0.125 points to continue its effort to contain soaring real estate prices.

“The central bank raised interest rates last quarter mostly due to the [red-hot] property market [in the Greater Taipei area]. As the real estate market hasn’t cooled down yet, the central bank will likely continue to do so,” Liang said.

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