Fri, Dec 23, 2022 page12

• GDP might slow to 2.41% next year

  DEMAND FALLING: Academia Sinica said that a global economic slowdown caused by inflation, high interest rates and geopolitical tensions would weigh on Taiwan

  • By Crystal Hsu / Staff reporter
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  Taiwan’s GDP growth could slow to 2.41 percent next year, while inflation might be relatively high at 2.15 percent, meriting further interest rate hikes to curb consumer prices, Academia Sinica yesterday said.

  The institute’s growth forecast is the lowest among the nation’s research bodies, while it is the only agency to predict an inflation rate of more than 2 percent — the central bank’s target level.

  An ongoing global economic slowdown — induced by inflation, interest rate hikes and geopolitical tensions — would negatively affect Taiwan’s exports and GDP growth, as evidenced by rapidly falling demand for technology products, Academia Sinica research fellow Ray Chou (周雨田) said.

  

  From left, Academia Sinica Institute of Economics acting head Hsu Yu-chin, research fellow Ray Chou and vice president Huang Chin-Shing pose for a photograph at a forum in Taipei yesterday.

  Photo: Hsu Tzu-ling, Taipei Times

  Chou said exports of goods and services are expected to grow a mild 2.71 percent next year with the US and Europe heading toward recession, and China grappling with COVID-19 outbreaks.

  Imports of goods and services would fare better with a 4.06 percent increase, aided by relatively high international energy and raw material prices, the institute’s semi-annual report showed.

  Domestic demand would continue to recover following the reopening of borders in October, as well as more active spending by the government and public enterprises, he said.

  Private consumption would rise 4.51 percent, reversing two years of contraction, as people become more comfortable attending gatherings and traveling, despite lingering COVID-19 infections, he added.

  The government and public enterprises are expected to lend support by raising their investments by 5.06 percent and 5.29 percent respectively, Academia Sinica said.

  Private investment is expected to rise a modest 1.95 percent, as firms reduce or delay capital spending plans to cope with inventory adjustments and poor order visibility, it said.

  Consumer prices might prove a challenge and the central bank should press ahead with more interest rate hikes next year, despite a slowdown in price trends, Chou said.

  Taiwan’s moderate inflation rate has much to do with government intervention, such as reducing the sales tax on imported energy and raw materials, and freezing the prices of electricity and fuel, he said.

  The measures caused Taiwan Power Co (台電) and state-owned refiner CPC Corp, Taiwan (台灣中油) to incur heavy losses, which is not sustainable, Chou said.

  Inflation might climb once the government ends the measures, he said.

  The core consumer price index, a more reliable long-term price tracker as it excludes volatile items, has been higher than headline consumer prices, affirming his view, Chou said.

  Rent has significant weight in household spending, which rose more than 2 percent over the past few months and would continue to climb, as rent hikes usually take place after house price gains, he said.

  The central bank can help mitigate inflationary pressures through more active monetary tightening, Chou said, adding that he would favor a rate hike of 0.25 percentage points.
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