The Chung-Hua Institution for Economic Research (CIER,
"Based on the government's latest statistics on export growth and stock prices for the third quarter, we revised upward our 2007 GDP growth forecast by another 0.8 percentage points," Wang Lee-rong (
However, the Taipei-based think tank trimmed its GDP growth forecast for next year to 4.16 percent -- down from the 4.41 percent it forecast in October -- because of expectations of a US economic slowdown, Wang said.
She also expressed concern over the rising consumer price index and said that the inflationary benchmark's annual growth would likely average 1.39 percent this year and rise 2.01 percent next year.
On a more positive note, private consumption is expected to post an annual growth of 3.33 percent in the fourth quarter and average 2.87 percent for the year. Growth next year is forecast to hit 3.08 percent, CIER said.
"Domestic demand is the only area that is expected to make crucial contributions to the local economy next year should the government provide some incentives to spur consumption," Wang said.
For example, she said, the government could take the initiative in raising civil servants' salaries to encourage businesses to hike wages.
Wang said that work should no longer be characterized by "hard labor," but rather as a "work smart" era. However, salaries in the industrial and service sectors on average rose only 1 percent from a year earlier.
CIER also forecast that the NT dollar would appreciate to NT$32.4 against the US dollar in the fourth quarter and average NT$32.84 for the year. The institute expects an increase to NT$32.07 next year.
Average interest rates for one-year savings deposits will climb to 1.93 percent this year and 2.16 percent next year, CIER said.
Wu Chung-shu (
"It is highly likely that private consumption growth will surpass 2 percent next year," Wu said.
"But forecasting a surge past 3 percent is a high call" given expectations of flat property and stock market performances and the looming uncertainty in the runup to elections, Wu said.
Globally, economic difficulties arising from the impact of the US' subprime mortgage crisis and the ensuing credit crunch are expected to last through the middle of next year.
Also at the seminar was Richard Kao (高子敬), president of Taiwan Securities Investment Advisory Co (台証投顧), who forecast that the NT dollar would trade between NT$31.5 and NT$32.5 next year against the greenback as capital outflow rises.
Based on the Big Mac Index -- a popular method of measuring the purchasing power parity between two currencies using the price of a Big Mac as a basis for comparison -- "the NT dollar is undervalued by 25 percent while the Chinese yuan is greatly undervalued by 54 percent," Kao said.
He predicted that the central bank would raise benchmark interest rates by 0.125 percentage points this month, another 0.125 percentage points in March and 0.25 percentage points in June "to the neutral 3.75 percent level."
There's also room for the US Federal Reserves to cut interest rates by at least 0.5 percentage points in the near future, he said.
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