UBS Group AG yesterday raised its economic growth forecast for Taiwan this year from 2.8 percent to 3 percent based on expectations of strong domestic consumption.
The Swiss banking giant also raised its forecast for next year from 2.5 percent to 2.8 percent. Its prediction is the most optimistic among several research institutes.
Supported by gains in the local stock market and the recently passed income tax reforms, domestic consumption would continue to be the main economic growth driver, UBS economist Zeng Li (曾立) wrote in a report.
The correlation was first seen during the final quarter of last year, when consumption growth printed 2.7 percent, unchanged from the previous period, Zeng said.
During the same period, GDP growth soared to 3.3 percent, besting the expected range of between 2.6 and 2.7 percent, he said.
He added that the 2.7 percent rate was higher than the 2.2 percent average growth rate recorded between the first quarter of 2016 and the second quarter of last year.
The consumer price index (CPI) is expected to average out at 1.5 percent this year, Li said, noting that the figure would likely peak at 2 percent during the third quarter before falling to 1.3 percent in the last three months of the year.
He attributed the CPI movements to rising tobacco and oil prices.
An additional NT$20 levy on each package of cigarettes pushed overall inflation up from minus-0.3 percent in October last year to 1.2 percent in December, Zeng said, noting that inflation would continue its upward trend this year until the end of September.
As for crude oil, it has been nearing the US$70 per barrel benchmark, and prices are not likely to fall due to the rosier picture of global growth, Zeng said.
In November last year, the Directorate-General of Budget, Accounting and Statistics forecast a 2.29 percent GDP growth for this year, similar to the Taiwan Institute of Economic Research (台灣經濟研究院) and Standard Chartered Bank’s forecasts last month of 2.34 percent and 2.3 percent respectively.
Chung-Hua Institution for Economic Research (中華經濟研究院) chairman Hu Sheng-cheng (胡勝正) last month said that GDP growth could hit 3 percent this year, provided that the government properly implements its spending for the Forward-looking Infrastructure Development Program.
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