The Chung-Hua Institution for Economic Research (CIER, 中經院) raised its economic growth forecast for the year yesterday to 4.67 percent, up from the previously estimated 4.16 percent, on closer economic ties with China, which would boost domestic demand.
“In the second half [of this year], a pickup of domestic demand will contribute more than export growth to the nation’s economy,” Wang Lee-rong (王儷容), director of the institute’s Center for Economic Forecasting, told a press conference yesterday, adding that “robust export growth in the first two quarters [this year] will continue to bolster the local economy.”
The Taipei-based think tank said that president-elect Ma Ying-jeou’s (馬英九) pledge to allow 3,000 Chinese tourists per day to enter Taiwan beginning in the third quarter would bring in NT$60 billion (US$1.99 billion) in tourism revenue annually if each tourist spent US$250 per day for a seven-day stay.
The think tank also said the nation’s private consumption would see 3.29 percent growth this year — the second-highest since 2001, with private investment likely averaging at an annual growth of 5.11 percent.
As benefits from China-related economic integration remain to be seen, Wang said the think tank shared the business community’s optimism, but remained prudent in revising upward its GDP forecast, as it would take time for the governments on both sides of the Taiwan Strait to negotiate and implement deals.
However, CIER said that the local economy this year was unlikely to outperform last year, given the global economic slowdown, rising raw material prices and inflationary pressures.
The CIER forecast was more optimistic than recent ones by the Economist Intelligence Unit (EIU) and the IMF, which slashed their GDP prediction for Taiwan in light of the weakening US economy. The EIU said on Tuesday that Taiwan’s GDP growth would increase 4.5 percent this year from 5.7 percent last year, while the IMF said last week that GDP growth would increase of 3.4 percent this year from 5.7 percent last year.
On the inflation front, CIER said yesterday that the consumer price index would likely rise at an annualized 2.64 percent this year, compared with 1.8 percent last year.
“Inflationary pressures have become the biggest threat to the nation’s economic development,” Wang said.
Rising raw material prices would pose a greater threat to the local economy than rising fuel prices, as there are alternatives — such as public transportation — to avoid oil consumption, said Kuo Nai-fong (郭迺鋒), associate professor and chair at Shih Hsin University’s finance department, at the same venue yesterday.
As the value of the US dollar is weakening amid a slowing economy back home, the value of the New Taiwan dollar is expected to continue climbing and to average at NT$30.63, 6.74 percent higher than last year’s average of NT$32.84, CIER said. The NT dollar is likely to reach NT$30.02 to the US dollar next year, it said.
On the back of improved economic fundamentals, the economic growth would improve to 5.43 percent next year while the inflation growth would decline to an estimated 1.78 percent, CIER said.
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