No rate changes likely: institute

GLOBAL CHALLENGES::An expert said the nation would have to deal with the uncertainty of the US Federal Reserve’s efforts to normalize its monetary policy

By Amy Su  /  Staff reporter

Thu, Dec 26, 2013 - Page 13

The central bank may keep its policy interest rates unchanged for the 10th straight quarter at its board meeting today, and further put rates on hold for the whole of next year, concerned about more risks to the nation’s economy, Yuanta-Polaris Research Institute (元大寶華綜合經濟研究院) said yesterday.

The private think tank made the remarks after revising downward its forecast for the nation’s GDP growth next year to 2.72 percent, from the 3.45 percent it estimated in September.

The 2.72 percent growth forecast marked the lowest level among domestic economic research institutes, but was higher than the 2.59 percent estimated by the Directorate-General of Budget, Accounting and Statistics (DGBAS) last month.

The institute also cut its forecast for economic growth this year to 1.77 percent, from the 2.38 percent estimated in September.

“The global economy is likely to experience a gradual upturn, but more risks could lie ahead,” Yuanta-Polaris chairman and president Liang Kuo-yuan (梁國源) told a press conference, citing comments by the IMF and the Organisation for Economic Co-operation and Development (OECD).

The central bank has limited space to raise its policy rates in the near future before the end of next year, Liang said, adding that pace of rate adjustment would not be faster than other major Asian markets.

Liang said the economy is likely to face two major risks factors next year: the fundamental change of the global economy and uncertainty over the US Federal Reserve’s move to normalize its monetary policy.

In addition, the continuous sluggish momentum in domestic demand, especially private consumption, may be a drag on GDP growth next year, according to the quarterly report conducted by Yuanta-Polaris.

The institute forecast a 1.55 percent growth for private consumption next year, with private investment expected to rise 3.79 percent year-on-year.

On the external trade front, the goods and services exports may show a 3.93 percent expansion next year, with imports set to increase 3.69 percent from a year earlier, the report said.

Annual economic growth in the first quarter next year could amount to 2.22 percent, with the pace in the following three quarters expected to improve quarter by quarter to 2.22 percent, 2.36 percent and 3.25 percent.

The institute forecast the nation’s inflation rate will rise to 1.15 percent next year, compared with the 1.42 percent increase estimated previously.

The think tank forecast the New Taiwan dollar will continue depreciating against the US dollar next year, with the annual rate set to average NT$30.1.

The NT dollar yesterday fell for a 12th straight session against the greenback, ending down NT$0.08 to close at NT$30.047.