Nation set for 3.7% GDP growth: TIER
The Taiwan Institute of Economic Research (TIER, ) yesterday tuned up its forecast on the nation’s GDP growth to 3.7 percent this year on the back of greater economic prospects and falling oil prices.
The TIER’s forecast is 0.03 percentage points higher than its previous forecast made in January.
The TIER projects that both exports and local demand will grow. Low oil prices and economic recovery around the globe already led to a boost in consumer confidence. Imports of consumer goods saw double-digit growth in the first quarter, and there have also been gains in the retail and food sectors.
Businesses are expected to step up investment as well. Fixed capital formation by big electronics companies may expand between 5 and 10 percent in 2015. Private investment will rise nearly 6 percent, the TIER said.
Looking at the global landscape, the IMF recently made a downward modification of its growth forecast of the U.S. and mainland China, but tuned up expectations for Japan and Europe.
All in all, the world economy is on track for a “stable growth,” TIER said.
Gordon Sun ( ), director of the TIER Macroeconomic Forecasting Center, said three uncertain factors loom over the economy down the road.
First, when and by how much will the U.S. Fed hike interest rate. History shows every time the Fed made a rate adjustment, a period of financial turmoil followed, Sun said. The second factor is oil price, for it will affect local firms’ inventory levels. Thirdly, the precipitation that Taiwan receives in the future, as water and utility rationings can hurt business activities, could be a factor.
Stock and Real Estate Market
The local stock market has been booming lately. The TIER attributed the phenomenon to an overflow of capital now that more than 30 countries have implemented quantitative easing.
China’s central bank has lowered the cash reserve ratio to pump a substantial amount of money into the market. Along with the recently launched ShanghaiHong Kong Stock Connect, it is a sign that Beijing is trying to pump up the market, said TIER President Lin Chien-fu ( ).
It is likely to have ramifications across Asia, and the stock market in Taiwan may soon reach 10,000 points, Lin added.
The real estate market does not have such rosy prospects, however. Property trade in Taiwan’s six special municipalities — Taipei, New Taipei City, Taoyuan, Taichung, Tainan and Kaohsiung — dropped between 10 and 48 percent so far this year.
The number of upscale apartment transactions plunged 78 percent. The government’s heavy tax and loan restriction policies have wielded impact on the market, explained TIER researcher Liu Pei-chen ( ), who predicted a “trading drought” for high-end apartments this year.
The construction sector also underperformed. Labor shortage and contractual disputes have stalled the progress of public construction, Liu said.