Yuanta-Polaris Research Institute (元大寶華綜合經濟研究院) yesterday raised its forecast for the nation’s economic growth this year to 3.65 percent, from the 3.48 percent it forecast in December last year, citing improving global economic sentiment and a strong base effect.
The private Taipei-based think tank’s 3.65 percent growth forecast represents the highest among major domestic economic think tanks and it was also higher than the 3.59 percent growth forecast by the Directorate-General of Budget, Accounting and Statistics (DGBAS) last month.
“Economic sentiment in Taiwan has been improving since we last forecast the nation’s GDP growth [in December last year],” Yuanta-Polaris president Liang Kuo-yuan (梁國源) told a press conference.
The institute has also adjusted upward its growth forecasts for output, private consumption and private investment to 6.11 percent, 2.18 percent and 6.98 percent respectively.
In December last year, the institute forecast 6.03 percent growth in output this year, while expecting private consumption and private investment to increase by 1.53 percent and 3.34 percent respectively.
However, the nation’s economic fundamentals remain weak as the institute’s higher forecast is mainly due to a low base last year. Of its 3.65 percent GDP growth forecast, 1.86 percent comes from the low base effect, the institute said.
Yuanta-Polaris forecast that the economy will expand 2.82 percent year-on-year in the current quarter, 3.93 percent in the second quarter, 4.19 percent in the third quarter and 3.62 percent in the final quarter of the year.
The institute forecast that headline inflation will rise to 1.53 percent this year, from the 1.41 percent growth estimated in December last year. However, the 1.53 percent rise in the consumer price index (CPI) is still lower than the 1.93 percent recorded last year.
Mild inflation, as well as major global economies’ continued use of quantitative easing strategies, has left Taiwan’s central bank with limited space to tighten monetary policy this year, Liang said.
Yuanta-Polaris expects the central bank to keep its policy interest rate unchanged at 1.875 percent at a board meeting tomorrow, he added.
Liang said the value of the New Taiwan dollar could fall further due to Japan’s quantitative easing measures, especially if South Korea keeps a lower won following the yen’s decline to keep its exports competitive. South Korea is one of Taiwan’s principal trading rivals.
“I do not rule out the possibility that the NT dollar may drop to NT$30 in the near future, but this would only be a short-term situation,” Liang said.
Yuanta-Polaris forecast that the NT dollar will average NT$29.7 against the US dollar this year, from an average of NT$29 forecast previously.