The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth this year to 4.8 percent, as exports continue to gain traction while domestic demand continues to recover from the COVID-19 pandemic.
The Taipei-based think tank, which projected 3.73 percent growth in December last year, said that the economy has chance of expanding 5 percent if uncertainty clears up.
The steep revisions have much to do with positive COVID-19 vaccine results that are allowing people and commodity flows to gradually regain momentum, CIER president Chang Chuang-chang (張傳章) said.
Photo: Wu Chia-ying, Taipei Times
“Private consumption is heating up, while external demand remains vibrant,” Chang said, referring to this year’s economic state.
Domestic demand is expected to be the main growth driver, partly due to a lower comparison base last year, when consumer spending declined 1.24 percent, leaving exports to single-handedly hold up the economy, the institute said.
Private consumption might rise 5.08 percent this year, while private investment could grow 4.38 percent after major technology firms announced plans to upgrade their technology and expand capacity to meet an increase in demand.
Taiwan is home to the world’s top chipmakers, chip designers and suppliers of electronic components used in smartphones, PCs, vehicles and other products.
Chipmaker Taiwan Semiconductor Manufacturing Co (台積電), DRAM chipmaker Nanya Technology Corp (南亞科技) and LCD panel makers AU Optronics Corp (友達光電) and Innolux Corp (群創) have all steeply increased their capital spending for the next few years, CIER researcher Peng Su-ling (彭素玲) said.
The tech and non-tech sectors have both reported that they have more orders than they can digest, as the pandemic has sped up digital transformation by corporations, organizations and individuals.
Exports are likely to grow 17.42 percent and imports 14.85 percent, giving Taiwan a bigger trade surplus and resulting in appreciation of the New Taiwan dollar, CIER said.
The NT dollar might trade at an average of NT$28.39 against the greenback this year, CIER said.
The NT dollar yesterday closed at NT$28.151 against the US dollar in Taipei trading.
The consumer price index, a critical inflation gauge, is forecast to rise 1.31 percent this year, compared with a 0.23 percent contraction last year, CIER said.
The world is closely monitoring inflationary readings, which could cause the world’s central banks to halt monetary easing earlier than expected if drastic price gains are maintained.
CIER said that US-China trade tensions and COVID-19 infections are main downside risks that might slow a global economic recovery.
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