CHIER lowers Taiwan's economic growth forecast to 4.16% for 2008

The Chung-Hua Institution for Economic Research (CHIER) yesterday revised its projection for Taiwan's economic growth to 4.16 percent for 2008 from 4.41 percent, due to some uncertain factors, such as what they characterized as a "domestically cold, externally warm" economic condition.

The CHIER, a major private economic thinktank, said that the upcoming legislative and presidential races slated for Jan. 12 and March 22, 2008 respectively, will force private investors to take a wait-and-see attitude toward domestic investments, which, in turn, will undermine domestic demand.

Meanwhile, local stock and realty markets will enter a period of technical corrections, and private spending is also likely to grow at a slower pace than this year.

CHIER also predicted the island's economic growth rate for this year at a robust level of 5.35 percent, with per capita national income estimated at US$17,244. As to 2008, the institution projected the per capita national income to grow to US$18,437.

The robust export growth is estimated at 7.51 percent this year, making it the major engine behind Taiwan's overall economic expansion of 5.35 percent this year. But in 2008, the export growth may shrink to 5.11 percent.

The island's consumer price index is controlled at a level of under 2 percent this year, but the corresponding growth rate is likely to soar past the 3 percent level to hit 3.10 percent in 2008 in case the international crude oil price maintains an average of US$95.9 per barrel.

Amid the higher inflation pressure, the New Taiwan dollar is expected to appreciate slightly to 32.07 against the U.S. dollar, compared with an average exchange rate of 32.84 for this year, CHIER researchers said.

In terms of interest rates, the Central Bank of China is expected to allow the local interest rates to rise slowly, and the average lending rates offered by local banks are estimated at 2.14 percent in the first quarter, 2.16 percent in the second quarter, 2.17 percent in the third quarter and 2.19 percent in the fourth quarter, compared to an average level of 2 percent this year.

On another front, the CHIER also forecast the annual growth of average substantive monthly pay for employees in the industrial and service sectors at less than 1 percent, compared to an average inflation rate of close to 2 percent for commodity prices. This may be the major reason behind locals' growing dissatisfaction with living conditions.