Growth in national private consumption may drop to less than 1 percent this year on the back of stagnancy in real wages and slowing property transactions, the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) said yesterday.
Weak momentum in private consumption made the Taipei-based institute cut its annual GDP growth forecast for the nation to 2.52 percent this year from the 3.71 percent it forecast in April.
The institute’s latest forecast showed private consumption this year may only grow 0.97 percent from a year earlier to be the weakest sector of the nation’s economy.
The 0.97 percent year-on-year growth in private consumption forecast by the TIER is the lowest forecast among domestic economic institutes, and it brought down its forecast for economic growth this year by 0.88 percentage points.
Other than the long-lasting issue of wage stagnancy, the institute cited contraction in property transaction as an important factor lowering private consumption this year.
“The decline in transfer of ownership of houses has dragged down consumption of home appliances and related facilities,” Gordon Sun (孫明德), director of the institute’s economic forecasting center, told a media briefing.
Meanwhile, about 10 percent of Taiwan’s labor force works in China, reducing the overall contribution to the consumption in Taiwan, Sun added.
In contrast, TIER said private investment — which may show a 5.83 percent expansion this year — will be the main sector supporting the nation’s economic growth during the period, in line with forecasts by other major economic institutes.
The institute forecast that exports and imports will report 3.93 percent and 1.74 percent growth this year respectively.
However, economic sentiment in the second half of this year may improve from the first half, Sun said, citing rising confidence by local manufacturers.
The latest survey conducted by the institute showed 33.9 percent of local manufacturers polled last month were bullish when asked about economic prospects over the next six months, up from the 32.1 percent recorded in May.
Those who felt bearish about the near future stood at 17.7 percent last month, down 1.9 percentage points from May.
However, due to concerns over various global economic uncertainties mainly driven by the possible phasing out of quantitative easing in the US, the business climate gauge for the manufacturing sector amounted to 99.47 points last month, down 2.24 points from the revised 97.23 points recorded in May, TIER said in its monthly report.
In the service sector, the business climate gauge stood at 95.1 points last month, also down 0.79 points from a revised 95.89 points in May, the report said.