The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its GDP growth forecast for this year to 1.78 percent, an increase of 0.13 percentage points from the previous forecast, aided by an improved global economy and an increase in crude oil prices.
The projection is slightly lower than the Directorate-General of Budget, Accounting and Statistics’ forecast of 1.87 percent and the National Development Council’s target of at least 2 percent.
“Despite lingering uncertainty, the global economy will fare better this year than last year, boding well for Taiwan’s GDP growth,” TIER president Jeff Lin (林建甫) said.
The pace of improvement is modest, but broad-based, supported by recovering raw material prices, Lin said.
The absence of any immediate threats to growth led the Taipei-based think tank to raise its forecast for this year’s growth in exports and imports to 3.89 percent and 4.25 percent respectively, an improvement from its prediction three months earlier, the TIER report showed.
The upward adjustment came after international research institutes increased their forecasts for the global economy and are consistent with earnings projections by major Taiwanese firms.
Improving exports will help boost private consumption, allowing firms to buy more equipment and increase headcounts, the TIER said.
Private consumption is set to expand 1.91 percent, an increase of 0.1 percentage points from the previous forecast, according to the report.
Capital formation would increase 2 percent from last year’s level, with the government and state-run enterprises likely to add 1.19 percent and 1.73 percent in capital spending respectively, while private sector holding investment plans would remain unchanged, the TIER said.
The prediction runs counter to the stated aims of the council, which on Monday pledged to help boost private investment through the provision of incentives including financial aid, deregulation and tax cuts.
The institute expects consumer prices to pick up 1.4 percent this year, 0.1 percentage points higher than its forecast in November last year, according to the report.
Downside risks include interest rate hikes by US Federal Reserve, leading global funds to seek better yields in the US and creating volatility on global financial markets, Lin said.
The trend would allow the US dollar to gain in value against major currencies, with the New Taiwan dollar this year likely to trade at an average of NT$32.4 against the greenback, according to the report.
The central bank might take its cues from the Fed and other global central banks and hike interest rates slightly, Lin said.
The property market is to remain soft as more than 100,000 new houses are due to join the market, creating correction pressure on prices, TIER senior analyst Arisa Liu (劉佩真) said.
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