Taiwan’s inflation could exceed 2 percent this year if oil prices continue to surge amid escalating tensions in the Middle East, prompting the government to reassess its economic outlook, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.
DGBAS Minister Chen Shu-tzu (陳淑姿) told lawmakers at a meeting of the legislature’s Finance Committee that the agency’s earlier growth forecast of 1.68 percent in the consumer price index (CPI) and 7.71 percent for GDP this year did not account for the ongoing Middle East conflict and would need revision, if tensions persist.
The previous forecast assumed an average international crude price of US$58.6 per barrel, but prices have surged to top US$100 per barrel as geopolitical tensions intensified, Chen said.
Photo: Liao Chen-hui, Taipei Times
Every 10 percent increase in oil prices would raise inflation by 0.24 percentage points and reduce economic growth by 0.12 percentage points, she said.
If crude oil climbs beyond US$100 per barrel, representing a 70 to 80 percent jump, the CPI could rise by about 1.7 percentage points, pushing inflation beyond 2 percent, while GDP growth could slow by 0.8 to 0.9 percentage points, she added.
The impact would remain limited if the Middle East conflict ends quickly, Chen said, adding that the government has already adopted price-stabilization measures to curb inflation.
If the conflict drags on, the Cabinet’s price stabilization task force could introduce additional measures.
The DGBAS is scheduled to update its economic forecast in May.
However, National Development Council (NDC) Minister Yeh Chun-hsien (葉俊顯) expressed greater optimism, saying that inflation still has a good chance of remaining below the central bank’s 2 percent alert level, while economic growth could exceed the government’s 7.71 percent forecast.
Taiwan’s economy remains resilient, supported by robust exports driven by rising capital spending from global cloud service providers, Yeh told a meeting of the legislature’s Economics Committee.
Rapid development and the adoption of artificial intelligence technologies could further bolster growth momentum, he said.
Amid rising geopolitical tensions, the government has secured sufficient liquefied natural gas supplies for this and next month, and prices for household natural gas would remain unchanged this month, he added.
Authorities would coordinate with state-run CPC Corp, Taiwan (中油) to stabilize the prices of essential goods, as well as implement a price-smoothing mechanism for gasoline and diesel, and other measures to cushion price increases, Yeh said.
The government has also further reduced commodity taxes on gasoline and diesel to 50 percent, ensured adequate fertilizer supplies, and continued fuel subsidies for the agriculture and fisheries sectors to help keep CPI growth below 2 percent this year, he said.
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