Central bank raises Taiwan GDP growth forecast to over 5% for 2021

06/17/2021 09:32 PM
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Taipei, June 17 (CNA) The central bank has raised its forecast for Taiwan's economic growth for 2021 to over 5 percent, after concluding a policy-making meeting on Thursday.

The bank's forecast of 5.08 percent growth for Taiwan's gross domestic product (GDP) in 2021, is an upgrade from its previous estimate of 4.53 percent made in a quarterly meeting held in mid-March.

To keep liquidity ample, the central bank on Thursday also decided to leave its key interest rate unchanged, as the market had widely anticipated, for the fifth consecutive quarter, with the discount rate remaining at 1.125 percent, the lowest in the country's history.

Despite the upgrade in its GDP growth forecast, the central bank appeared more cautious than the Directorate General of Budget, Accounting and Statistics (DGBAS), which raised its forecast of Taiwan's 2021 economic growth earlier this month from 4.64 percent to 5.46 percent.

The central bank said the local economy performed well in the first quarter of this year due to strong global demand, but momentum could be limited by an outbreak of domestically transmitted COVID-19 cases, starting in mid-May.

According to the DGBAS, Taiwan's economy grew 8.92 percent from a year earlier in the January-March period, the highest growth since the fourth quarter of 2010.

The central bank said the pandemic has prompted the government to raise an alert to Level 3, under which onsite dining is not allowed and entertainment venues are closed to avoid mass gatherings, so private consumption could feel the pinch resulting from the restrictions of movement.

Fortunately, the central bank said, the global economy is expected to continue a recovery for the rest of this year, with Taiwanese tech exports likely to keep benefiting from the trend at a time of strong demand for emerging technologies.

According to the DGBAS, Taiwan's exports of merchandise and services are expected to grow 15.44 percent in 2021.

The central bank said domestic demand is expected to ride the waves of more investments pledged by Taiwanese firms with overseas operations, focusing on industries such as 5G infrastructure and green energy development.

The central bank said Taiwan's consumer price index(CPI) will likely grow 1.60 percent in 2021 as the CPI growth for the second half is forecast to hit 1.69 percent, surpassing the 1.51 percent forecast for the first half.

The central bank added that rising consumer prices in the second half of the year will come as many economies reopen and due to a spike in international crude oil prices.

Taiwan's core CPI, which excludes vegetables, fruits and energy, is expected to grow 1.11 percent in 2021, the central bank said.

The central bank said inflationary pressure in Taiwan remains mild.

As for the local property market, the central bank said it has decided to leave the current credit control unchanged in a bid to continue to rein in speculation in home prices at a time when the young generation still cannot afford to buy the expensive residential homes.

The central bank imposed ceilings on mortgages home buyers can borrow from banks in December 2020 and March 2021, a move expected to lower liquidity in the residential property market.

Yang Chin-long (楊金龍), governor of the central bank, said the selective credit control in the housing market aims to stabilize the local financial market.

He said the COVID-19 outbreak has dampened sentiment in the local housing market to some extent, but more time is needed to observe the real impact.

The central bank said it will review the effects of its home mortgage policies and make possible adjustments at an appropriate time.

(By Pan Tzu-yu and Frances Huang)

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