Fri, May 20, 2011 - Page 1 News List

GDP forecast revised up to 5.06 percent

STRONG FIRST QUARTER:Export industries are expected to grow by 6.87%, although lower demand from the US and quake-ravaged Japan may hurt growth in the next three quarters

By Amy Su  /  Staff Reporter

The government yesterday raised its GDP growth forecast for this year to 5.06 percent, up from the 5.04 percent it forecast last month, on the back of a faster-than-expected economic expansion in the first quarter, the Directorate-General of Accounting, Budget and Statistics (DGBAS) said.

GDP expanded 6.55 percent in the first quarter, up 0.36 percentage points from the 6.19 percent growth estimated last month, DGBAS data showed.

“The strong momentum of exports and domestic consumption will be two major drivers for economic growth this year,” Directorate-General of Accounting, Budget and Statistics Minister Shih Su-mei (石素梅) told a media briefing.

Private consumption is expected to expand 3.96 percent this year and exports are predicted to grow by 6.87 percent, while domestic investment is forecast to fall 0.62 percent this year on last year’s higher comparison base, DGBAS data showed.

Donna Kwok (郭浩庄), economist for Greater China at HSBC Asia, said the strong first-quarter growth boded well for this whole year and retained her full-year economic growth forecast of 5 percent.

“Taiwan’s robust exports to China and western countries in the first quarter churned the manufacturing sector, throwing a critical lifeline to job seekers and domestic investors, further increasing the nation’s private household spending,” Kwok said in a note yesterday.

However, Tsai Hung-kun (蔡鴻坤), director of the DGBAS’ statistics division, said the massive earthquake in Japan and lower demand from the US would influence Taiwan’s economic growth in the following quarters.

“We had thought the nation’s economy could grow 5.28 percent this year on a strong first-quarter performance, but Japan’s quake made us revise down estimates for the following quarters, dragging down the full-year GDP growth forecast to 5.06 percent,” Tsai said.

When Japan’s economy slides down by 1 percentage point, Taiwan’s GDP growth will decline by 0.05 percentage points, Tsai said, adding that if the US economy falls by 1 percentage point, Taiwan’s GDP growth may fall by 0.14 percentage points.

Tsai said the nation’s economy could return to fast-paced growth in the second half of this year, as the negative influence from Japan gradually recedes.

As for inflation, the DGBAS lowered its forecast for the consumer price index (CPI) this year to 2.1 percent, down 0.08 percentage points from its preliminary forecast last month, amid the New Taiwan dollar’s recent appreciation against the US dollar.

Although the rising value of the NT dollar helps stabilize inflationary pressures, it could increase exporters’ costs and hurt the nation’s economic growth, Tsai said, adding that exports usually contribute about 70 percent to Taiwan’s GDP.

According to the DGBAS, every NT$1 rise against the greenback could cut Taiwan’s GDP growth by 0.18 percentage points, with inflation down by 0.19 percentage points.

With the government’s slightly more sanguine GDP outlook and less inflation concerns, Cheng Cheng-mount (鄭貞茂), chief economist of Citigroup in Taipei, said in a statement yesterday that the central bank would continue to tighten monetary policy at the current measured pace of 12.5 basis points each quarter for this year.

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