After revising downward its forecast for Taiwan’s economic growth for this year to 4.73 percent amid rising global uncertainties, private think tank Polaris Research Institute (寶華綜合經濟研究院) expects the central bank to leave policy interest rates unchanged at its board meeting today.
It is the first time this year that the Taipei-based think tank has cut its forecast for the nation’s GDP growth. It forecast a full-year 5.2 percent economic growth in June, the institute’s report showed.
“The debt crisis in Europe and the slowing US economy dragged down the global economic outlook for the second half of the year, leading us to cut the forecast for Taiwan’s economic growth,” Liang Kuo-yuan (梁國源), the institute’s president, told a media briefing.
The institute estimated 3.52 -percent and 4.38 percent economic growth in the third and fourth quarters respectively, compared with a 5.59 percent expansion in the first half of the year, the report said.
“We revised down the growth of exports, private consumption and private investment for the second half, especially for the third quarter,” Liang said.
Polaris expects the private investment sector to decline 11.61 percent in the third quarter, with private consumption rising 2.89 percent. In June it estimated a 1.8 percent loss in private investment and a 3.95 percent growth in private consumption.
Following slowing economic expansion in the second half, Liang expects the monetary policymaker to hold policy interest rates during its quarterly meeting today.
However, Liang did not expect a financial crisis to happen again, even though the current uncertainties in Western countries “make us feel very uncomfortable and insecure.”
The institute also forecast -Taiwan’s economy would grow 4.51 percent next year, with growth momentum rebounding in the second half, Liang said.
“The weak economic outlook for the US and Europe may gradually recover in the second half of next year, further driving up the economic expansion in the second half of next year,” he said.
The economic slowdown in the second half of this year may also build a relatively low comparison base for the same period next year, Liang added.
On the inflation front, Polaris cut its forecast for the consumer price index (CPI) to 1.5 percent this year, from the 2.05 percent growth estimated in June. It also forecast inflation would rise 1.56 percent next year, data showed.
In addition, the institute revised downward its estimates for the New Taiwan dollar’s average rate against the US dollar to NT$29.4 this year, from NT$29 forecast previously.
It also expects the NT dollar’s average rate to remain flat at NT$29.4 versus the greenback next year by falling in the first half and rebounding in the second half, Liang said.
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