The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its forecast for the nation’s GDP growth this year to 2.04 percent, from its last projection of 1.78 percent, saying that exports would increase as the global economy continues to improve.
The think tank estimated that GDP expanded 2.55 percent in the first quarter, but that growth would slow over the rest of the year as a low-base effect tapers off.
“While GDP growth might rise above 2 percent this year, momentum is likely to weaken each quarter due to a lack of major catalysts,” TIER economist Gordon Sun (孫明德) told a news conference in Taipei.
Exports of electronics, raw materials and machinery equipment — the nation’s main drivers of growth — have benefited from recovering inventory demand as price concerns fade amid stabilizing global crude oil prices, Sun said.
Inventory-building and a low base last year accounted for a 15.1 percent year-on-year surge in exports during the January-to-March period despite it being the slow sales season, the economist said.
Foreign firms would need strong sales over the rest of the year to continue ordering products from Taiwan in a similarly aggressive fashion, Sun said.
Taiwan is home to the world’s largest contract chipmakers, chip designers, electronic component suppliers and machinery vendors.
Sun said he failed to any see encouraging signs on the horizon and that expectations of a drastic boost from the next-generation of iPhones might be without foundation.
Apple Inc is reportedly planning a major redesign for its popular handheld device, which is to be unveiled in the second half of the year.
Sun said he doubted a technological breakthrough would achieve a satisfactory yield rate.
That is why the institute set its GDP growth forecast at 2.3 percent for this quarter, 1.9 percent for the third quarter and 1.47 percent for the final quarter, he said.
Stagnating global crude prices lent support to a guardedly optimistic outlook, Sun said.
On the domestic front, consumer consumption is expected to expand 1.93 percent this year, slightly better than the 1.91 percent the institute predicted three months earlier.
Faster growth would require a noticeable wage increase for the nation’s workers, as wages have been stagnant for more than a decade, Sun said.
The institute did not factor in the Cabinet’s Forward-looking Infrastructure Construction Project, saying that only NT$20 billion (US$663.31 million) is allocated to spent this year and budget implementation tends to be inefficient.
TIER expects the New Taiwan dollar to trade at an average of NT$31.2 against the greenback this year, financial expert Wu Meng-dao (吳孟道) said.
That would suggest a 3.47 percent depreciation going forward, from the closing rate of NT$30.152 in Taipei trading yesterday.
The US Federal Reserve is to hike interest rates further this year, making the US dollar a more attractive investment option, Wu said.
Taiwan’s central bank is likely to hold policy rates unchanged this year in a bid to support the economy, Wu said.
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