The Taiwan Institute of Economic Research (TIER), one of the leading think tanks in the country, on Monday lowered its forecast for Taiwan’s 2022 gross domestic product (GDP) to below 4 percent, citing weaker private consumption.
TIER adjusted its 2022 forecast to 3.81 percent, down 0.29 percentage points from its previous estimate in April, joining other institutions that have cut their projections for the country’s economic growth this year amid rising inflation and challenges associated with the prevalence of domestic COVID-19 cases.
Last week, Academia Sinica, the top research institute in Taiwan, lowered its economic growth forecast for 2022 from 3.85 percent to 3.52 percent, while the Chung-Hua Institution for Economic Research (CIER), another leading think tank in Taiwan, cut its projection from 3.96 percent to 3.56 percent.
In late May, the Directorate General of Budget, Accounting and Statistics (DGBAS) also readjusted its forecast for Taiwan’s GDP growth, from 4.42 percent to 3.91 percent, also citing weakening private consumption.
Speaking with the press on Monday, Gordon Sun (???), director of TIER’s Economic Forecasting Center, said inflationary pressure, volatility in the financial markets, and the domestic COVID-19 situation had dampened consumer sentiment.
This has taken a toll on retail sales, as well as on revenue in the lodging and food/beverage industry, Sun said.
As a result, TIER has lowered its forecast for Taiwan’s private consumption growth by 1.38 percentage points to 3.05 percent, he said.
Nonetheless, when last year’s relatively low comparison basis is taken into consideration, private consumption is still expected to drive Taiwan’s 2022 economic growth, Sun said.
On the issue of private investments, TIER said, demand for equipment remains solid in the manufacturing sector, as it seeks to expand production expansion.
Therefore, despite a relatively high comparison basis last year, it was maintaining its private investment growth forecast for 2022 at 4.25 percent, TIER said.
Capital formation, meanwhile, is expected to grow 4.43 percent in 2022, TIER said, downgrading its forecast by 0.35 percentage points.
As for bilateral trade, Sun said demand for emerging technology applications remains solid, as evidenced by the double digit growth in Taiwan’s exports and imports in the first half of the year, despite the uncertainty in global trade resulting from the Russia-Ukraine war and bottlenecks in the global supply chain.
TIER, therefore, has raised its 2022 growth forecast for Taiwan’s exports by 1.10 percentage points to 5.47 percent, and for imports by 0.51 percentage points to 4.86 percent, he said.
The think tank also hiked its forecast for Taiwan’s 2022 consumer price index (CPI) growth, from 2.40 percent to 2.95 percent, saying that energy and grain prices are expected to rise due to the Russia-Ukraine war, while the prices of imported goods will continue to increase because of a weaker Taiwan dollar.
According to TIER, the Taiwan dollar is expected to average NT$29.30 against the United States dollar in 2022, a drop from its earlier forecast of NT$28.80.
The CPI growth is likely to moderate in the fourth quarter of the year, however, as Taiwan has a mechanism in place to cap oil and electricity prices, according to TIER President Chang Chien-yi (???).
The outlook for the global economy, meanwhile, depends on the situation in the two top economies, he said, referring to the U.S., which is aggressively raising key interest rates, and China, which remains hampered by lockdowns due to domestic COVID-19 infections.
Source: Focus Taiwan News Channel