The Chung-Hua Institution for Economic Research (CIER, 中經院) remained upbeat about Taiwan’s economic prospects as it slightly increased yesterday its estimate for next year’s GDP growth to 4.66 percent from a forecast of 4.65 percent in October.
The Taipei-based research institute said the economy is expected to shrink 2.96 percent this year, compared with its projected contraction of 3.72 percent two months ago. “Statistics by the Ministry of Economic Affairs show that consumer confidence has risen and retail revenues have seen a 16-month high,” Wang Lee-rong (王儷容), director of the institute’s center for Economic Forecasting, said in a seminar in Taipei yesterday.
The CIER report said the consumer confidence index last month was 62.47 percent, up from 60.56 percent in October.
With a rebound in domestic demand, private expenditure will increase 1.55 percent year-on-year next year, compared with an estimate of 0.5 percent for this year, the report said.
The institute said domestic investment was expected to record mild growth next year, with a projected year-on-year increase of 5.55 percent, 17.35 percentage points higher than the decline of 11.8 percent this year.
Despite the signs of economic recovery, Wang said the labor market was expected to make a slow recovery next year as the institute forecast the unemployment rate would hit 5.8 percent, slightly lower than this year’s 5.86 percent.
“While the global economy has come out of deep recession, inflation is likely to reoccur because of a food crisis, rising oil prices, the appreciating US dollar as well as speculation,” Wang said, adding that speculation would be the most important factor.
A sharp increase in advanced countries’ debt was another factor undermining the global economic recovery, she said.
The institute said the Consumer Price Index (CPI) would increase 1.07 percent year-on-year next year against a 0.83 contraction this year.
The CIER report said that while the central bank usually raises interest rates one to two quarters after the US Federal Reserve, next year it could immediately follow the Fed’s lead because China could raise its interest rates between the end of this year and the beginning of next year. Asian central banks are striving to limit currency appreciation over fears that a strong currency could harm export competitiveness and exacerbate unemployment, Wang said.
“But the NT dollar will not appreciate as much as other Asian major currencies such as the Australian dollar and yen,” she said.
The local currency is expected to appreciate against the greenback next year by an average of NT$31.66, from NT$33 this year, the report said.
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