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Taiwan forecast to see 2.88% GDP growth

TAIPEI, Taiwan -- Due to a warming global economy and higher-than-expected domestic demand, Yuanta-Polaris Research Institute (元大寶華綜合經濟研究院) yesterday raised its forecast for Taiwan's economic growth this year to 2.88 percent.

The latest forecast is 0.16 percentage points higher than the institute's previous forecast of 2.72 percent made at the end of last year. The 2.88-percent GDP growth forecast is slightly higher than the 2.82-percent forecast made by the Cabinet's Directorate-General of Budget, Accounting and Statistics (主計處).

Yuanta-Polaris President Liang Kuo-yuan (梁國源) gave three reasons for the upward adjustment. First, Taiwan's exports in October and November of last year were adjusted to higher figures. Second, major international research institutes have raised their global GDP growth forecast, which is likely to benefit Taiwan. Third, private demand appears to be higher than previously expected. Higher consumption is partially contributed by growth in real earnings, Liang said.

Taiwan's Exports Declined

On the negative side, Liang pointed out that exports in January and February were far lower than expected. In addition, China's exported products are now in competition with Taiwan's products.

While the global economy is improving, Taiwan's trade volume with the world has declined. Yuanta-Polaris said that exports around the globe are now growing at a slower pace than the average global GDP. With emerging economies lacking growth momentum, Taiwan should consider making adjustment to its economic policy which relies heavily on exports to emerging countries, Liang said.

Academia Sinica (中研院) forecast Taiwan to have 2.89-percent economic growth this year. The Taiwan Research Institute (台綜院) forecast 2.81-percent growth. The Taiwan Institute of Economic Research (台經院) and Chung-Hua Institution for Economic Research (中經院) forecast higher than 3-percent GDP growth, at 3.17 percent and 3.03 percent respectively.

Global Economic Improvement

Developed nations are gradually moving out of the financial quagmire, and with improvements in economic fundamentals, the economic growth in 2014 will be better than that of 2013, the research institute said.

Yuanta-Polaris predicted 2.44-percent, 2.2-percent, 3.41-percent and 3.38-percent economic growth for each quarter this year. In addition, the institute forecast 2.21-percent growth in private consumption, 3.81-percent growth in private investment, 4.42-percent growth in exports, and 4.41-percent growth in imports. The institute predicts a 1.1-percent inflation rate this year.

Foreign investors consider Taiwan a hub to move capital to mainland China and other parts of the world. However, they will grow wary of this harbor if the cross-strait service trade agreement fails to pass, Liang cautioned.

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