The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday lowered its forecast for Taiwan’s GDP growth this year from 3.96 percent to 3.56 percent, as global inflation and a domestic COVID-19 outbreak subdue growth momentum.
“The downward revision came in the wake of global inflation weakening demand for consumer electronics and the ongoing COVID-19 outbreak that has derailed a recovery in private consumption,” CIER president Chang Chuang-chang (張傳章) said, turning conservative from three months earlier when the Taipei-based think tank raised the growth forecast on the back of robust exports.
CIER previously expected private consumption to advance 4.99 percent this year, but has trimmed it to 2.81 percent due to a COVID-19 outbreak that started in April, Chang said.
Photo: CNA
Steep consumer price hikes, forecast to increase 3.11 percent this year, from a previous projection of 2.56 percent, would make consumers think twice about spending, he said.
Inflation would remain challenging this month and beyond, but significantly moderate, compared with 9.1 percent in the US and nearly 20 percent for some European countries, Chang said.
“Let’s see how the issue pans out [in Taiwan] as policymakers have adopted a host of measures to stabilize consumer prices,” he said.
Despite heightening uncertainty, Taiwan’s economy would still grow by more than 3 percent for a fourth straight year, Chang said, adding that it would see a more balanced recovery this time.
Domestic demand would contribute 2.03 percentage points to economic growth, with 1.25 percentage points coming from private consumption, the institute said.
With the government expected to further ease disease control measures in the coming months, private consumption should pick up speed, he said.
Domestic tourism is already regaining momentum after a new round of travel subsidies went into practice last week, government officials have said.
“As long as domestic demand comes out of the woods, Taiwan’s economy should fare well,” Chang said.
At the same time, private investment is holding firm, unaffected by unfavorable events abroad, such as persistently high raw material prices, the Russia-Ukraine war and China’s tight COVID-19 restrictions, the institute said.
Exports are forecast to grow 15.96 percent from last year, while imports are expected to increase 17.4 percent, driven by global demand for digital transformation and technology innovations, it predicted.
CIER expects the local currency to trade at an average of NT$29.23 against the US dollar this year and NT$29.52 next year, compared with NT$28.02 last year.
The US Federal Reserve’s interest rate hikes would attract global funds in pursuit of better yields and thus strengthen the US dollar, CIER said.
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