Despite raising its forecast for full-year GDP growth yesterday, the Chung-hua Institution for Economic Research (CIER, 中華經濟研究院) expects Taiwan’s economic growth momentum to slow in the second half amid the monetary tightening measures in the emerging markets and the ongoing debt crisis in the eurozone.
The Taipei-based think tank revised upward its forecast for GDP growth this year to 5.02 percent from the 4.29 percent it forecast in April, citing stronger-than-expected economic expansion in the first quarter and less-than-expected impact from the global uncertainties.
“We had overestimated the negative influence of supply-chain disruptions from Japan’s March earthquake and tsunami on Taiwan’s economy in the second quarter, as the effect of orders transferred from Japan is stronger than expected,” Wang Lee-rong (王儷容), director of the institute’s center for economic forecasting, told a media briefing.
The institute forecast Taiwan’s economic to grow 4.61 percent in the second quarter, up from the 3.94 percent it estimated in April, further bringing up the GDP growth to 5.56 percent in the first half, data showed.
However, Wu Chung-shu (吳中書), the institute’s president, expects the economic expansion to slow in the second half of the year, with a GDP growth forecast of 4.54 percent.
“More and more emerging countries are introducing tightening measures by increasing policy rates and decreasing government expenses, and the eurozone’s debt problem remains unsolved, further contracting the momentum of the global economy,” he said.
These negative risks may also provide a chance for the central bank to hold its pace of rate-hiking next year, after continuing raising policy rates by 12.5 basis points in every board meeting this year, Wu said.
Despite these uncertainties, the nation’s economy is expected to maintain steady growth in the second half thanks to strong domestic demand, Wu said.
The institute predicted 2.57 percent growth for private consumption in the second half from a year ago and a 3.74 percent increase for private investment.
For the whole year, private consumption is expected to grow 3.41 percent from last year and private investment will expand 6.12 percent, the institute forecast.
The institute also forecast the nation’s inflation to grow 1.7 percent this year, while the New Taiwan dollar will trade against the US dollar at an average of NT$29.09.
For next year, the think tank forecast a 4.93 percent expansion in Taiwan’s economy, driven mainly by domestic demand.
“Since the growth of the exports sector may slow amid the uncertainties in global economy, domestic demand, especially in the investment sector, may create more opportunities for the economy next year, as more overseas companies keep a positive view on Taiwan’s investment environment,” Wu said.
Chou Ji (周濟), a professor of economics at Shih Hsin University, also agreed that private investment would play an important role in the economy, adding that the strong momentum could be proved in the latest data released by the Ministry of Economic Affairs on Wednesday.
Private investment rose 10.05 percent from a year earlier to NT$631.8 billion (US$21.9 billion) in 851 investment projects in the first half of the year, accounting for 57.43 percent of this year’s target, according to the ministry’s data.
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