DGBAS Revises Economic Growth Forecast to 5.06% This Year

Thanks to better-than-expectation growth in the first quarter, the Cabinet-level Directorate General of Budget, Accounting, and Statistics (DGBAS) revised upward yesterday (May 19) the forecast growth of Taiwan`s economy to 5.06% this year, compared with the original forecast of 5.04%.

Meanwhile, along with improved employment, private consumption will expand 3.96% this year, a seven-year high, according to the DGBAS.

Shih Su-mei, director general of DGBAS, reported that bolstered by brisk domestic and overseas sales, the economy expanded 6.55% in the first quarter, 0.36 of a percentage point higher than the original prediction. This is the sixth quarter in a row for the economic growth rate to exceed the 6% mark.

In view of the effect of the massive Japanese earthquake and high international oil prices, the DGBAS, however, revised downward the growth rates from the second through the fourth quarter.

Shih Su-mei noted that exporters had a brilliant performance in the reception of orders in the first quarter. Domestic consumption was also brisk, thanks to economic upturn and improved employment, bolstering consumption confidence among local people, as well as the influx of Chinese visitors, up 8.62% year-on-year, further fueling domestic demand.

DGBAS statistics show that sales of retail business and dining business advanced 10.24% and 7.09%, respectively, in the first quarter, when the sales of small passenger cars, based on new licenses, jumped 55.81%. Overall fixed private capital formation expanded 12.4%, a double-digit growth for the sixth quarter in a row.

The DGBAS predicted that private consumption may break the NT$8 trillion mark, reaching NT$8.33 trillion, this year, a seven-year high, and per capita income will also surpass the US$20,000 mark. Consumer price index will increase by 2.1%, compared with the previous forecast of 2.18% in April.

Tsai Hung-kun, director of the third bureau, DGBAS, pointed out that soaring international materials prices have jacked up domestic non-durable goods, such as foods and energy, inflicting inflationary pressure on local people. Prices of durable goods, however, declined. The appreciation of the NT dollar will be able to offset the inflationary pressure, according to Tsai.

DGBAS estimated that for every NT$1 of appreciation in the exchange rate of the NT dollar against the U.S. dollar can offset 0.19 of a percentage point from CPI increase. The appreciation, however, would cut GDP growth by 0.18 of a percentage point, as exports account for 70% of Taiwan`s GDP.

(by Philip Liu)

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