Fri, Apr 17, 2015 page14

• CIER raises GDP forecast as cheap fuel offsets costs

  OPTIMISTIC: The research institution said the savings gained from cheaper fuel costs would free up funds to spend elsewhere, increasing domestic investment

  • By Crystal Hsu / Staff reporter
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  The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday raised its forecast for GDP growth this year to 3.56 percent from the 3.5 percent it forecast in December last year, based on expectations that cheaper fuel costs would offset a slowdown in exports.

  “We are slightly more optimistic about the economy going forward, because, despite weaker exports, private consumption and investment should fare better, thanks to cheaper fuel costs,” CIER president Wu Chung-shu (吳中書) said at a press conference in Taipei.

  In addition, it is important to factor in lower inflation when reading major economic data, Wu said.

  Exports contracted 4.2 percent in the first quarter annually, dragged by soft sales of mineral, chemical and plastic products, the Ministry of Finance said last week.

  Disappointing exports had little impact on GDP growth, because it is net exports — exports minus imports — that drives GDP growth.

  In the January-to-March quarter, imports fell by 15 percent year-on-year, leaving a trade surplus of US$13.42 billion, more than double the amount recorded in the same period last year, ministry data showed.

  Fuel cost savings could mean consumers and companies have more money to spend on other products, the CIER said, predicting private consumption would expand by 3.02 percent and domestic investment by 4.37 percent this year, up from its previous estimates of 2.78 percent and 3.27 percent respectively.

  Cheaper oil prices would also mean lower inflation, with the consumer price index projected to ease an average of 0.37 percent this year, down from 1.2 percent last year, the CIER said.

  The wholesale price index — the gauge of production costs — is forecast to decline 4.56 percent this year, widening from a 0.57 percent contraction last year, as imports become cheaper, the institute said.

  Wu voiced caution over listless imports — that are seen as an indicator of investment interest — because most manufacturers buy capital equipment from abroad to increase capacity.

  The nation’s semiconductor companies, the main driver for robust electronics exports, saw overseas shipments grow by a modest 5.3 percent last month from the same period a year earlier.

  Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday trimmed its capital expenditure for this year on cautious market sentiment.

  Taiwan’s overall exports are set to grow 6.26 percent and imports 5.58 percent this year, the CIER predicted, lower than forecasts made in December last year of 7.35 percent and 6.36 percent respectively.

  The job market would continue to improve this year with jobless rates averaged at 3.72 percent, from 3.96 percent last year, the institute said.

  The CIER expects the New Taiwan dollar to weaken this year — trading at an average of NT$31.18 against the US dollar, from NT$30.37 last year — as the greenback holds firm amid expectations of an interest rate hike in the second half.
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