The government yesterday raised its economic growth forecast for this year to nearly 10 percent, up from its August estimate of 8.24 percent, which economists said would increase the odds of the central bank raising interest rates next month.
The economy is expected to expand 9.98 percent for the full year after the third quarter saw better-than-expected growth of 9.8 percent from a year earlier on soaring private investment, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said.
“The 9.98 percent of GDP growth would be the highest in 21 years,” Directorate-General of Budget, -Accounting and Statistics Minister Shih Su-mei (石素梅) told a news conference, adding that robust private investment and domestic consumption contributed the most to the substantial growth.
The agency revised upward its forecast for private investments for this year by 18.7 percentage points, while domestic consumption was expected to grow 4.48 percent, up 1.26 percentage points from its previous forecast, a DGBAS official said.
Liang Kuo-yuan (梁國源), president of Taipei-based Polaris Research Institute (寶華綜合經濟研究院), said by telephone that the faster-than-expected expansion and the rising inflation rate increased the probability of the central bank -hiking interest rates this quarter.
“At present, we are experiencing a positive output gap — the actual output is greater than the potential output, meaning that the economy is overheating a bit,” Liang said. “Looking forward, rising consumer prices will be the main concern of the central bank in adjusting its monetary policy.”
The consumer price index (CPI) is forecast to rise 1.85 percent next year, up from 0.98 percent this year, on the back of soaring global raw material prices, the DGBAS said.
“Overall, consumer prices will remain stable next year,” it added.
Cheng Cheng-mount (鄭貞茂), chief economist of Citigroup in Taipei, said the inflation rate of 1.85 percent next year is fairly high -compared with the past couple of years, and that he believed this would put significant pressure on the central bank to raise its rates.
“Rising raw material prices and increasing domestic demand next year are the two main factors in boosting up consumer prices,” Cheng said by telephone, playing down the impact of the strengthening New Taiwan dollar, which may ease inflationary pressure.
Despite robust growth this year, the DGBAS revised downward its GDP forecast for next year to 4.51 percent, down from its previous prediction of 4.64 percent in August, blaming the higher comparison base this year, currency gains and uncertainty over global economic growth.
Private investment will likely contract 2.76 percent next year after exports are forecast to see 31.91 percent growth this year, the -highest since 1966, on increasing global demand for electronic products, the DGBAS said.
“The contraction is mainly -owing to the extremely high base this year. We expect the amount of private investment to continue to top NT$2 trillion [US$65.7 billion] next year,” Shih said.
Gross national product per capita will exceed US$20,000 for the first time next year, up from US$19,046 estimated for this year, the agency said. However, it is still far short of President Ma Ying-jeou’s (馬英九) campaign pledge to achieve annual per capita income of US$30,000 by 2016.
The DGBAS forecast that overseas shipments will likely expand 9.21 percent next year. Such shipments are expected to grow 33.88 percent from a year ago this year, with the trade volume reaching a record high of US$272.7 billion.
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