Central bank raises Taiwan's GDP growth forecast to 4.05% in 2022

Taipei, March 17 (CNA) The central bank said after concluding a quarterly policymaking meeting Thursday that it has raised its forecast for Taiwan's 2022 gross domestic product (GDP) growth from the earlier estimate of 4.03 percent made in December 2021 to 4.05 percent.

The upgrade came after the central bank took into account Taiwan's strong export performance and an increase in private investment, while the impact on private consumption from the spread of COVID-19 seems to be limited, the bank said in a statement.

However, due to a relatively high comparison base in 2021 and the impact of the Russian invasion of Ukraine, the upward revision of the forecast for Taiwan's GDP is only minor, the central bank said.

The bank's policymaking meeting on Thursday also decided to raise its key interest rates by 0.25 percentage points, with the new rates set to come into effect on Friday.

The central bank's decision to raise interest rates follows a similar move by the U.S. Federal Reserve, which kicked off a rate hike cycle overnight by raising interest rates by 0.25 percentage points to tackle growing inflationary pressures amid rising crude oil and raw material prices.

After the rate hike, the central bank's discount rate will rise to 1.375 percent from the historic low of 1.125 percent, the central bank said.

The rate on accommodations with collateral will grow to 1.75 percent, while the rate on accommodations without collateral will rise to 3.625 percent, the central bank added.

It was the first rate hike by the central bank after seven consecutive quarters of unchanged interest rates.

Related: Taiwan central bank raises interest rates by 0.25 percentage points

The bank took into account the growing price of energy and other commodities, which has raised inflationary pressure at home and abroad, before deciding on the rate hike.

It said the local consumer price index has been above 2 percent, the alert threshold, for several months, and that is expected to continue into the third quarter of this year.

After the Fed raised its interest rates, the central bank said it followed suit to tighten its own monetary policy, stabilize domestic consumer prices and dampen inflation expectations in the market.

The central bank expects the local CPI to fall below 2 percent in the fourth quarter, though it has also raised its growth forecasts for domestic CPI and core CPI, which excludes fruit, vegetables and energy, from 1.59 percent and 1.45 percent to 2.37 percent and 1.93 percent, respectively.

Keeping an eye on property market

The latest quarterly policymaking meeting did not introduce new measures to rein in home prices, which surprised the market.

The central bank said since December 2020, it has undertaken four rounds of selective credit control measures in the local property market which have slowed down home mortgage growth.

The central bank added it will continue to monitor the property market and if necessary adjust its credit control policies.

Before the central bank concluded its quarterly policymaking meeting, National Development Council (NDC) chief Kung Ming-hsin (龔明鑫), speaking at an economic conference organized by the Chung-Hua Institution for Economic Research (CIER), said he believed the rate hike cycle by the Fed will lead other central banks to follow suit, which will boost consumer price stability worldwide.

In addition to the rate hike by the Fed on Wednesday, the American central bank also hinted at an additional six further rate increases to come later in the year.

Update

March 19: Taiwan's central bank to have 2 more rate hikes this year: UBS

March 19: Major lenders announce rate hikes after central bank's surprise rate increase