Soaring global inflation has weakened demand for consumer electronics, while a local COVID-19 outbreak has derailed a recovery in private spending
By Crystal Hsu / Staff Reporter
The Chung-Hua Economic Research Institution (CIER, 中華經濟研究院) yesterday lowered its forecast for Taiwan’s GDP growth this year from 3.96% to 3.56%, global inflation and a national epidemic of COVID-19 slowing growth momentum.
“The downward revision came in the wake of global inflation weakening demand for consumer electronics and the ongoing COVID-19 outbreak which has derailed a recovery in private consumption,” the report said. CIER chairman Chang Chuang-chang (張傳章), becoming a curator three months earlier. when the Taipei-based think tank raised growth forecasts on the back of robust exports.
CIER previously expected private consumption to grow 4.99% this year, but cut it to 2.81% due to a COVID-19 outbreak that began in April, Chang said. .
Strong consumer price increases, which are expected to rise 3.11% this year, compared to a previous projection of 2.56%, would make consumers think twice about spending, he said. .
Inflation would remain difficult this month and beyond, but markedly subdued, compared to 9.1% in the United States and nearly 20% for some European countries, Chang said.
“Let’s see how the problem unfolds [in Taiwan] as policymakers adopted a host of measures to stabilize consumer prices,” he said.
Despite rising uncertainty, Taiwan’s economy is still expected to grow by more than 3 percent for a fourth consecutive year, Chang said, adding that it will experience a more balanced recovery this time.
Domestic demand would contribute 2.03 percentage points to economic growth, with 1.25 percentage points coming from private consumption, the institute said.
With the government expected to further ease disease control measures in the coming months, private consumption is expected to pick up, he said.
Domestic tourism is already gaining momentum after a new round of travel subsidies were introduced last week, government officials said.
“As long as domestic demand is out of the woods, Taiwan’s economy should do well,” Chang said.
At the same time, private investment is holding steady, unaffected by adverse events abroad, such as continued high commodity prices, the Russian-Ukrainian war and China’s strict COVID-19 restrictions, the institute said.
Exports are expected to increase by 15.96 percent from last year, while imports are expected to increase by 17.4 percent, driven by global demand for digital transformation and technological innovations, he predicted.
CIER expects the local currency to trade at an average of NT$29.23 against the US dollar this year and NT$29.52 next year, from NT$28.02 this year. last.
Interest rate hikes by the U.S. Federal Reserve would attract global funds looking for better yields and thus strengthen the U.S. dollar, CIER said.
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