Private think tank Polaris Research Institute (寶華綜合經濟研究院) yesterday raised its forecast for economic growth for this year for a second time to 5.2 percent amid stronger-than-expected economic expansion in the first quarter and the less-than-expected impact of the earthquake and tsunami in Japan in March.
Liang Kuo-yuan (梁國源), the institute’s president, said he expects the central bank to raise interest rates by 0.125 percentage points during the monetary policymaker’s quarterly meeting today.
Liang’s forecast of a mild increase in rates matched estimates made by other economists, including Citigroup chief economist Cheng Cheng-mount (鄭貞茂) and Wang Lee-rong (王儷容), an economist at the Chung-Hua Institution for Economic Research (中華經濟研究院).
In March, Polaris raised its forecast for GDP growth this year to 4.78 percent, up 0.16 percentage points from the 4.62 percent growth it estimated in December, the institute’s data showed.
“Although the pace of the global economic recovery may slow in the second half of the year, the nation’s strong first-quarter has prompted us to raise the full-year GDP growth forecast,” Liang told a press conference.
The nation’s economy expanded 6.55 percent in the first quarter, 1.02 percentage points higher than the institute’s forecast of 5.53 percent.
The impact of the continuing power shortages in Japan after the quake and a shortage in the supply of electronic components were not as big as Polaris has expected. That development has eased the institute’s previous concerns and enhanced the potential for higher-than-expected growth, Liang said.
Liang said GDP growth could surge in the second quarter of the year, citing continuing strong momentum in both exports and retail sales.
The institute forecast the nation’s output will grow 8.33 percent this year, while private consumption and private investment are expected to surge 4.31 percent and 3.64 percent respectively, according to the the report.
However, tightened monetary policy in emerging markets and in the US economy after the end of the second round of quantitative easing, and the eurozone debt crisis would be the three main uncertainties for Taiwan’s economy, the institute said.
Liang expects inflation to edge higher in the second half of the year amid rebounding import prices, but the New Taiwan dollar’s continuing appreciation against the US dollar may help decrease inflationary pressures.
Stable economic expansion with inflation remaining in check would likely see the central bank maintain a steady pace of interest rate increases, by 12.5 basis points at every quarterly board meeting this year, he added.
Polaris retained its estimate that inflation will hit 2.05 percent this year, while raising its forecast for the average price of the NT dollar this year to NT$29, from its previous estimate of NT$29.4, indicating an average rate of NT$28.79 in the second half of the year.
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