The Taiwan Research Institute (TRI, 台灣綜合研究院) yesterday slashed its GDP growth forecast for this year to 2.52 percent, from the 4.02 percent it estimated in December last year, following on economic downturn in the second quarter.
However, the central bank might keep policy interest rates unchanged at a board meeting on Thursday next week because the nation’s policy rates have been relatively low for a long time, the institute said.
The think tank’s forecast was lower than the 3.03 percent growth forecast issued by the Directorate-General of Budget, Accounting and Statistics last month.
The TRI was the second domestic institute to cut its forecast for Taiwan’s economy this year to less than 3 percent. Last week, Cathay Financial Holding Co’s (國泰金控) research team revised its GDP growth forecast for this year to 2.45 percent, from the 3.73 percent it estimated in March.
TRI president Wu Tsai-yi (吳再益) blamed worse-than-expected economic conditions in the second quarter for the downward revision.
“Most of the institutes expected Taiwan’s economy to bottom out in the first quarter, but various economic indicators have shown it bottoming out in the second quarter,” Wu told a media briefing.
The institute forecast economic growth to fall 0.18 percent from a year earlier in the second quarter — the lowest level this year — and to rebound to 3.75 and 5.81 percent in the third and fourth quarters respectively.
Wu described external and internal fundamentals as “cold,” with sluggish exports in the first five months impacting domestic consumption and investment.
The export sector may expand 2.05 percent this year, with private consumption and private investment expected to post 1.92 percent and minus-0.16 percent growth respectively, the institute said in a report.
The institute said it expects headline inflation to grow 1.93 percent this year, lower than the critical mark of 2 percent set by the central bank.
The central bank might not cut its policy interest rates at a board meeting next week because of economic uncertainties, Wu said, adding that decreasing rates would not be likely to improve investment because the current interest rate is already low.
Wu said the central bank might choose to allow the New Taiwan dollar to decrease in value over the near term to spur exports.