The Directorate-General of Budget, Accounting and Statistics (DGBAS) yesterday revised downward its forecast for GDP growth this year to 3.38 percent from the 3.85 percent it estimated in February, after annualized growth in the first quarter fell to its lowest level in more than two years.
The DGBAS also raised its forecast for full-year inflation by 0.48 percentage points to 1.94 percent, close to the 2 percent warning mark.
“The lower-than-expected economic momentum in the first quarter was a major factor leading us to cut the forecast for economic growth this year,” DGBAS section chief Joshua Gau (高志祥) told a press conference.
The economy expanded 0.36 percent in the first quarter from a year ago, its lowest growth since the third quarter of 2009, mainly due to weaker-than-expected exports, the DGBAS said.
Exports fell 4 percent from the previous year in the first quarter, their first quarterly drop since the first quarter of 2009, as sales from key industries substantially declined.
Meanwhile, the government’s increase of fuel and electricity prices might also drag down private consumption in the second quarter, Gau added.
The DGBAS expected private consumption to rise 2.28 percent this year, lower than the 2.72 percent growth estimated in February.
As for inflation, the looming rise in consumer prices driven by the hikes in energy prices made the DGBAS raise its forecast for the full-year headline inflation index to 1.94 percent from the 1.46 percent it previously estimated.
However, the upward revision of 0.48 percentage points was lower than the 0.7 percentage-point increase DGBAS Minister Shih Su-mei (石素梅) forecast last month, in response to lawmakers’ questions.
DGBAS section chief Jasmine Mei (梅家瑗) said Shih’s forecast was the higher-end prediction.
In addition, prices of other agricultural and industrial raw materials, excluding crude oil, have declined recently, which might slow inflation, the statistics agency said.
Mei expressed reservations about the view that the economy has been on the rebound, saying its first-quarter performance was still sluggish.
Taipei-based Standard Chartered Bank economist Tony Phoo (符銘財) said Taiwan’s economy was beginning to bottom out, as overall growth on a seasonally adjusted annualized rate in the first quarter reversed two straight quarters of negative growth, as expected, to grow 1.06 percent.
With inflation looking set to rise on the back of higher energy prices, the central bank’s decision on monetary policy faces mounting challenges, and policymakers have repeatedly emphasized the need to balance growth with price stability, Phoo said in a research note.