Private think tank Polaris Research Institute (寶華綜合經濟研究院) yesterday revised downward its GDP growth forecast for this year to 2.5 percent, from the 3.88 percent it estimated in March, as worse-than-expected exports in the first half of the year raised pessimism regarding economic sentiment over next half year.
Polaris is the latest domestic think tank to cut Taiwan’s GDP growth forecast for this year to less than 3 percent.
Earlier this month, the Taiwan Research Institute (台灣綜合研究院) slashed its GDP growth forecast for this year to 2.52 percent, from the 4.02 percent it estimated in December last year, while 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.
The Directorate-General of Budget, Accounting and Statistics (DGBAS), which last month forecast the economy would expand 3.03 percent this year, is scheduled to update its growth forecast on July 31.
“The economic indicators did not show good signals in the first half of the year, further raising our pessimism for the full-year economy,” Polaris president Liang Kuo-yuan (梁國源) told a press conference.
Worse-than-expected export figures in the second quarter have led the institute to revise downward its economic growth forecast for the April-to-June period to 0.4 percent, from the 3.16 percent it estimated in March.
Exports dropped 5 percent from a year earlier in the first five months, data from the Ministry of Finance showed.
Meanwhile, continued uncertainties in the global economy were the other major factor leading the institute to cut its full-year GDP growth forecast, Liang said.
The institute forecast that economic growth in the third and fourth quarter would reach 3.35 percent and 5.6 percent respectively on the back of a base effect and a recovering economy in China, which may help drive up demand for Taiwanese products.
However, Liang said both the global economy and Taiwan’s economy were facing “anemic growth,” which indicates growing momentum will maintain sluggish for longer than initially estimated.
In this situation, the global economy will be easily dragged down by external shocks, which may further affect export-oriented countries like Taiwan, he said.
However, Liang said the central bank could keep its currency policy more flexible to drive up short-term export momentum, providing some strength for the nation’s economy.
On the inflation front, Polaris raised its growth forecast on the consumer price index (CPI) this year to 1.9 percent, from 1.57 percent.
The institute expects inflationary pressure to reach a peak in the third quarter this year, with annual CPI growth reaching 2.66 percent.