The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday cut its GDP growth forecast for the nation this year from the 3.96 percent it forecast in January to 3.48 percent, citing weaker-than--expected growth in the first quarter.
The government’s decision to raise gasoline and diesel prices this month, as well as increase electricity rates next month, also made the institute raise its growth forecast for inflation to 1.98 percent, up 0.52 percentage points from the January forecast of 1.46 percent.
The Taipei-based think tank’s latest forecast for economic growth was the lowest among all domestic economic research institutes and its growth forecast for inflation is the highest.
“Although the global economy has been resurging in the first quarter, the momentum was weaker than expected, leading us to revise down the full-year GDP growth forecast for Taiwan,” Gordon Sun (孫明德), deputy director of the institute’s macroeconomic forecasting center, told a press conference.
The institute revised downward its forecast for first-quarter economic expansion to 0.98 percent, from the 2.78 percent estimated previously, citing lower-than-expected exports and investments during the January-to-March period.
For the remaining quarters of this year, GDP is expected to grow 2.04 percent year-on-year in the second quarter, 4.57 percent in the third quarter and 6.07 percent in the final quarter, the institute said in a report.
Rising uncertainties about consumer prices, led by the looming rise in energy prices, also made the institute cut its growth forecast, Sun said.
Other than affecting economic growth and raising inflationary pressure, the hike in energy prices might further slow private consumption momentum, TIER president David Hong (洪德生) said.
The institute cut its forecast for full-year growth of private consumption to 2.51 percent, down 0.45 percentage points from its previous estimate.
The institute forecast the nation’s output to grow 2.11 percent this year, and input to fall 1.49 percent from a year earlier, the report said. It also forecast private investment to rise 0.66 percent this year.
Separately, a TIER survey showed business climate indicators for the manufacturing and -service sectors last month rebounded for the third consecutive month, indicating business sentiment continued to recover.
However, only 32.8 percent of the respondents expected business to pick up in the next six months, a sharp decline from the 45.7 percent recorded in a survey conducted in February.
The new survey confirmed that the recovery of the global economy made manufacturers feel more optimistic last month, Hong said.
However, uncertainties ,-including the return of the eurozone’s debt crisis and rising operating costs led by inflation, made them keep a relatively cautious outlook on the near future, Hong added.