Academia Sinica yesterday cut its forecast for this year’s GDP growth to 1.94 percent from a previous estimate of 3.81 percent made in December last year, citing sluggish momentum on exports as a result of global economic uncertainty, which may further impact domestic demand.
The latest forecast from the nation’s top research institute was the weakest among all domestic think tanks and it was also lower than the 3.03 percent growth forecast issued by the Directorate-General of Budget, Accounting and Statistics (DGBAS) in May.
The DGBAS is scheduled to update its forecast on July 31.
“Worse-than-expected international trade was the main adjustment in this revision, because world outlook and global trade activity remain very weak and uncertain,” Ray Chou (周雨田), an economic research fellow at Academia Sinica, told a press conference.
Exports fell 4.7 percent from a year ago in the first six months, marking one of the worst performances among countries in Asia, with exports to the US, Europe, China and Hong Kong all slowing down.
The lingering global economic uncertainty also prompted Academia Sinica to cut its growth forecast for the output sector to 0.87 percent this year from the 5.15 percent estimate it made in December last year.
Chou said sluggish external demand would further affect domestic demand and weaken the investment intentions of domestic firms, especially capital investment on equipment. The institute therefore revised down its growth forecast for private investment to minus-0.5 percent this year, from 2.2 percent previously.
Academia Sinica also adjusted downward its growth forecast for private consumption this year from 2.72 percent to 2.1 percent, as the government’s move to raise energy prices and a worsening stock market performance dampened consumer spending in the second quarter.
The institute forecast annual growth in headline inflation at 1.8 percent this year, up from the 1.16 percent it estimated previously.
Academia Sinica expects the economy to contract 0.89 percent from a year earlier in the second quarter, but to rebound with 2.72 percent growth and 5.29 percent growth in the third and fourth quarters respectively on the back of a lower base.
Peng Shin-kun (彭信坤), director of Academia Sinica’s Institute of Economics, said it was almost a “mission impossible” for the nation’s economy to grow more than 3 percent this year.
However, Hung Jui-bin (洪瑞彬), director-general of the Council for Economic Planning and Development’s economic research department, said the institute’s forecast was too pessimistic.
Despite both external and internal uncertainties increasing more than previously expected, Hung said the government has been launching various short-term and long-term projects to stimulate growth in exports, investment and consumption, and that it is hoping to see positive effects very soon.