COST OF LIVING/Taiwan's CPI growth to top 2% in 2022: central bank

05/18/2022 09:43 PM
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Taipei, May 18 (CNA) Taiwan's central bank on Wednesday predicted that annual inflation in Taiwan would surpass the 2 percent alert level, driven by the rising cost of imports.

The central bank said Russia's invasion of Ukraine and COVID-19 lockdowns by China had disrupted global supply chains and pushed up commodity prices, sending the local consumer price index (CPI) in Taiwan and other countries higher.

The CPI growth prediction was released in a written report submitted by the central bank to the Legislative Yuan Wednesday.

The central bank said the pace of the global economic growth was expected to slow down in the second half of this year, with inflation possibly further hindering the pace of economic development worldwide.

2022 Taiwan CPI forecast

In the Asia-Pacific region, while the economic recovery will continue, inflationary pressure is expected to keep growing to compromise that growth, the central bank said.

As for Taiwan, the central bank said the CPI growth is expected to stay high in the first half of this year before moderating from the middle of the year.

In April, Taiwan's CPI soared 3.38 percent year-over-year, the highest growth since August 2012, when it surged 3.42 percent, with the core CPI, which excludes vegetables, fruits, and energy, also rising 2.53 percent.

In the first four months of this year, the local CPI rose 2.95 percent from a year earlier.

Although the central bank has forecast the local CPI growth will moderate in the second half of the year, the bank still cautioned that uncertainty in the global economy could remain in place.

Economic outlook

In a quarterly policymaking meeting held in mid-March, the central bank 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, and also hiked its forecast for annual local CPI growth from 1.59 percent to 2.37 percent.

The next quarterly policymaking meeting is scheduled for mid-June, and the market is closely watching to see if the central bank will adjust its CPI forecast further.

Meanwhile, Gordon Sun (孫明德), director of the Economic Forecasting Center under the Taiwan Institute of Economic Research (TIER), said even if the Russia-Ukraine war and the COVID-19 pandemic ended, inflationary pressure was expected to remain an issue for Taiwan longer term.

At an economic conference held by TIER, Sun said the lingering trade tensions between the United States and China had sent ripples through economic trade globalization, which has raised product prices, while the commitment to carbon reductions in many economies have also pushed up energy prices.

In addition, Sun said with Taiwan's government increasing spending to care for an aging society, and the central bank maintaining a loose monetary policy to facilitate economic growth, the country was likely to face long-term inflation.

Echoing Sun, Cathay United Bank's chief economist Lin Chi-chao (林啟超) said he expected the inflation issue would bother Taiwan over the next five to 10 years, largely due to higher production costs resulting from interruptions in the global supply chain.

The central bank's report was released ahead of a hearing in the Legislature Thursday, where top officials from the central bank, Ministry of Finance, Ministry of Economic Affairs, Financial Supervisory Commission, and National Development Council will answer questions raised by lawmakers on the economic conditions at home and abroad.

(By Pan Tzu-yu and Frances Huang)

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