CIER forecasts economic growth in 2007 to reach 4.26 percent

This article was published by the Macroview Weekly on July 25, 2007. It reports that the Chunghwa Institution for Economic Research (CIER) recently revised upward its forecast for Taiwan's economic growth for 2007, from 4.17 percent to 4.26 percent.

Representatives of the institution said that all major countries, with the exception of the United States, have adjusted their economic projections upward after the economies of their countries performed better than expected in the first quarter of 2007.

While Taiwan posted economic growth of 4.15 percent in the first quarter, the country's economy is expected to perform even better in the second half of 2007 in light of the brisk international trade and the bullish outlook in most stock markets around the globe.

CIER predicted that Taiwan's economic growth will reach 4.06 percent for the second quarter, 4.13 percent for the third quarter and 4.69 percent in the fourth quarter, with the growth for the whole year registering 4.26 percent.

Taiwan's private consumption for 2007 is expected to increase by 2.91 percent, the second highest level since 2001, according to CIER.

CIER forecast Taiwan's economic growth will further expand to 4.52 percent for 2008, with the country's private consumption rising by 3.01 percent.

On the country's inflation rate, the CIER predicted that the consumer price index (CPI) will rise by 2.1 percent year-on-year for the third quarter of 2007, and 2 percent for the fourth quarter, with the CPI increasing 1.33 percent for the whole of 2007.

According to CIER representatives, whether the inflation rate will remain at a moderate level in the second half of 2007 will depend on international oil prices.

While the hikes in international primary products have so far only reflected in wholesale prices in Taiwan, the inflationary pressure is likely to increase as the trend continues.

Although the skyrocketing prices of oil, primary metals and grains caused Taiwan's wholesale price index to move up 7.11 percent for the first half of 2007, the CPI rose only 0.61 percent during the same period because most retailers were careful about transferring the burden of the hikes to consumers.

Also contributing to the moderate CPI growth is the good weather so far in 2007, which has caused vegetable prices to plummet 21 percent compared with that of 2006, offsetting price hikes in other products such as instant noodles, diary products and cooking oil.

In addition, the drop in prices of electrical appliances such as digital cameras and television sets have also helped stabilize consumer prices.

However, it will be hard to predict if the weather will remain good for the second half of 2007, especially when Taiwan has now entered its annual typhoon season, CIER representatives said.

Although an inflation rate of below 1.5 percent is moderate compared with the situation of many other countries, most people still find it hard to take as the wealth disparity between the rich and the poor continues to widen, CIER representatives said.