TIER upgrades '13 growth forecast to 3.49%

The figure is 0.07-percent higher than the institute's previous prediction, made in November.

TIER President David Hong (洪德生) said that positive developments abroad have helped to boost investor confidence. Among these, Hong said, was the stop to the decline of the Purchasing Managers Index (PMI) in Europe, and temporary measures taken to avoid the fiscal cliff in the U.S., though the debt limit crisis is far from being settled.

Hong said new policy routes being taken by the new government in Japan may also have a positive influence in Taiwan, as well as in Japan and the global economy at large. Tokyo plans to promote a 20-trillion-yen investment project to boost the domestic market. New Japanese Prime Minister Shinzo Abe has said that the country's new cabinet is focused on stabilizing the Japanese currency at around 90 yen per U.S. dollar in order to boost the country's exports and economy.

Domestic GDP growth

Gordon Sun (孫明德), deputy director of the institute's macroeconomic forecasting center, said that the GDP forecast released last November came amid high financial stress in the U.S. due to the approaching fiscal cliff. For the time being the situation will be relatively stable, one of the reasons for the new, more optimistic GDP forecast.

The U.S. debt situation, however, means uncertainty will remain in the global market in the first half of 2013, Sun said. Meanwhile, Japan's quantitative easing monetary policy, working in-line with its stimulus package, may affect the export and import sectors of countries that have strong business ties with Japan.

Taiwan's economic growth will possibly only start to accelerate beginning in the third quarter, said Sun.

TIER expects domestic consumption to grow by 2.41 percent and domestic investment by 4.43 percent. Inflation, as measured by the Consumer Price Index, is forecast to grow 1.53 percent in 2013.

Manufacturing, Service Sectors Both Grow

Following on the back of growth in November last year, TIER said that business cycle indicators both reflected positive performances for the manufacturing and service sectors in December.

The institute said that the indicator in December for the manufacturing industry was at 94.22 points, 3.81 points more than the month before.

The business cycle indicator in December was 93.32 points for the service sector, 6.57 points more in November. While both saw gains, TIER said average growth in the service sector outpaced manufacturing growth.

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