Academia Sinica yesterday trimmed its forecast for Taiwan’s GDP growth this year from 3.85 percent to 3.52 percent, while raising its inflation forecast from 2.04 percent to 3.16 percent, saying the economy is losing momentum due to rising consumer prices and other downside risks.
“The economic performance for the rest of this year will not be as smooth and optimistic as previously predicted,” Academia Sinica research fellow Ray Chou (周雨田) told an online news conference, citing an overheating US economy, the Ukraine war, China’s COVID-19 lockdowns and supply chain disruptions.
Global inflation has been rising and major central banks are tightening monetary policy to cool consumer demand and price hikes, Chou said.
Photo: Kelson Wang, Taipei Times
Academia Sinica is the only research body that in December last year forecast a more than 2 percent increase in the consumer price index this year, while other public and private institutes predicted a downhill trajectory.
However, all of the nation’s research bodies and institutions now forecast an inflation of more than 3 percent.
Chou said the central bank would be less active in tightening its monetary policy, causing the New Taiwan dollar to weaken further against the US dollar amid continuing capital flight.
Unfavorable conditions are weighing on the pace of global recovery, although many nations have chosen to live with COVID-19 and lifted disease control measures, he said.
Taiwan’s exports of goods and services, the economy’s main growth driver, could still grow 5.64 percent this year, driven by sustained demand for digital migration and technology innovation by corporations and organizations worldwide, he said.
There is resilient demand for chips used in high-performance computing, data centers and vehicles, but suppliers of electronic components used in smartphones, laptops and TVs are seeing order cancelations and price declines, local technology firms have said.
Local semiconductor firms have largely pressed ahead with capacity expansion plans, boosting private investments, while consumer spending inched up 0.46 percent in the first quarter, Chou said.
Local shipping and airline companies are also aggressively expanding their fleets amid expectations of a recovery in business, he said.
The wholesale price index, a measure of production costs, would likely advance 11.31 percent this year. That would squeeze corporate profit margins unless the companies pass the extra cost burden on to customers, the institute said.
Academia Sinica said it expects the NT dollar to trade at an average of NT$29.17 versus the greenback this year.
The local currency traded at NT$29.914 against the US dollar yesterday.
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