A local think tank yesterday revised its forecast for the nation’s GDP to a fall of 4.6 percent this year, citing warmer trade with China, although the figure is the lowest among all domestic institutes.
Polaris Research Institute (寶華綜合經濟研究院), which predicted in March the economy would contract 4.8 percent, said yesterday rush orders from China were stronger than expected and would buffer the impact of the global slump.
“The economy, which dropped 10.24 percent in the first quarter, saw a rebound this quarter, owing to rush orders from China that curbed the freefall in exports,” Liang Kuo-yuan (梁國源), president of the Taipei-based institute, told a media briefing.
The institute expects GDP to decline 8.04 percent and 3.58 percent in the second and third quarters respectively, and recover to 3.87 percent growth in the fourth quarter.
The main problem will be private investment, predicted to plunge 29.78 percent.
Exports, the main driver of economic growth in recent years, are expected to weaken 12 percent, compared with the 15 percent estimate three months ago, the report said.
While the pace of deterioration in exports slowed, the magnitude remains serious, Liang said, predicting that the central bank would maintain its loose monetary policy and leave interest rates at their current low levels.
“A rate hike now is too early,” Liang said. “The rising crude oil cost is out of tune with the world economy.”
The top monetary regulator is due to convene its quarterly board meeting and adjust interest rates, if necessary, on Thursday.
Liang said that recovery in Taiwan would have to wait until the world economy heals were it not for China’s intervention.
Because of political factors, Chinese orders for consumer electronic products come to Taiwan instead of South Korea, Liang said, adding that Chinese tourists to Taiwan also increased noticeably in recent months because of encouragement from Beijing.
Liang predicted the local currency would trade at an average NT$33.4 against the greenback.
“While improving cross-strait ties are favorable for the NT dollar, the demand for the US currency will not disappear,” the economist said. “The room for the NT dollar to fluctuate either way is limited.”
The institute expected consumer prices to sink 0.78 percent this year, saying that retailers will keep prices down to stimulate private consumption amid the recession.
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