Chung-Hua cuts GDP forecast to 2.28%

BETTER TIMES AHEAD?:A strong 4.97% rebound in private investment is forecast to drive growth next year to 3.31 percent, although the slowdown in China poses uncertainties

By Amy Su  /  Staff reporter

Thu, Jul 25, 2013 - Page 13

Taiwan’s economy is to grow about 2.28 percent this year and 3.31 percent next year, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) forecast yesterday.

The Taipei-based institute’s 2.28 percent forecast for this year was 1.35 percentage points lower than the 3.63 percent expansion it forecast in April.

The latest prediction was also lower than the 2.4 percent expansion forecast by the Directorate-General of Budget, Accounting and Statistics (DGBAS) in May.

The DGBAS is scheduled to announce its preliminary second-quarter GDP figure on Wednesday.

“The pace of recovery of Taiwan’s economy has remained quite slow,” CIER president Wu Chung-shu (吳中書) told a press conference yesterday.

The economy in the first half of this year is likely to have grown only 1.98 percent, with sentiment in the second half expected to recover gradually on the back of a slight improvement in the global economy, the institute said in its quarterly report.

The institute forecast a 2.67 percent and 2.45 percent year-on-year expansion for GDP growth in the third and fourth quarter respectively.

A strong rebound in private investment, which is expected to increase 4.97 percent from last year, will be the main driver for the economy this year, offsetting sluggish sentiment in the output sector and weak private consumption, the report said.

Private consumption is expected to grow 1.45 percent this year, with goods and services exports and imports expected to grow 3.76 percent and 3.59 percent respectively, the data showed.

However, the institute said momentum on Taiwan’s GDP growth may rebound next year, as private investment continued to support economic expansion, with exports to show steadier growth than this year.

Inflationary pressures will not be an issue either this year or next year, as the institute forecast a 1.32 percent rise in the consumer price index (CPI) this year, followed by a modest 1.53 percent expansion next year.

Liu Meng-chun (劉孟俊), the director of the institution’s center for economic forecasting, said that although various domestic indicators signified a challenging economic outlook ahead, the stronger-than-expected economic rebound in the US and Japan may be positive drivers to raise momentum for Taiwan’s GDP growth.

However, the possible economic slowdown in China, as well as the timing of the quantitative easing exit in the US, will raise uncertainties for Taiwan’s economy, Liu said.

The issue of the US quantitative easing exit will have a limited direct impact on Taiwan’s economy, Liu said, citing the central bank’s strict control of capital inflows and outflows.