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Central bank cuts Taiwan's GDP growth forecast to 1.46% for 2023

09/21/2023 11:03 PM
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Central Bank Governor Yang Chin-long explains the bank
Central Bank Governor Yang Chin-long explains the bank's economic forecast following a quarterly policymaking meeting in Taipei Thursday. CNA photo Sept. 21, 2023

Taipei, Sept. 21 (CNA) The Central Bank of the Republic of China (Taiwan) on Thursday said it has downgraded the country's gross domestic product (GDP) growth forecast to 1.46 percent for 2023, citing the impact of weakening global demand.

In June, the central bank lowered Taiwan's GDP growth forecast to 1.72 percent from an earlier estimate of 2.21 percent, largely reflecting the country's weaker-than-expected export performance.

The Directorate General of Budget, Accounting and Statistics (DGBAS) then forecasted in August that Taiwan's economy would grow 1.61 percent in 2023, a cut from the estimate of 2.04 percent made in May.

Speaking with reporters after the central bank concluded its quarterly policymaking meeting, however, governor Yang Chin-long (楊金龍) said he expected growth momentum to improve in the fourth quarter and to pick up next year.

Yang said growing emerging technologies, in particular artificial intelligence applications, are expected to create business opportunities and offset the current fragile global demand, which will push up Taiwan's exports in information communications gadgets.

In the first eight months of this year, Taiwan's outbound sales exports fell 7.3 percent from a year earlier in August, marking the 12th consecutive monthly year-on-year decline, but the fall was down from 23.4 percent in June and 10.4 percent in July, government statistics showed.

Sept. 8: Exports fall for 12th straight month, but the decline moderates

Sept. 20: Taiwanese firms' export orders down for 12th month in August

The central bank said Taiwan's economy is expected to grow 3.81 percent in the second half of this year as the decline in exports moderates. In the first half, the local economy contracted by 0.98 percent, according to the DGBAS.

The central bank was upbeat about the pace of economic growth in 2024, predicting GDP growth to hit 3.08 percent next year on the back of higher exports and private investments, although private consumption growth could be limited because of the relatively high consumption seen in 2023.

However, the 2024 growth rate predicted by the central bank is also lower than the DGBAS's 3.32 percent forecast made in August.

In the latest quarterly policymaking meeting, the central bank decided to leave its key interest rates unchanged with the discount rate at 1.875 percent -- the highest level in eight years. It was the second consecutive quarter that the central bank kept interest rates the same.

Sept. 21: Central bank leaves interest rates unchanged

Central Bank Governor Yang Chin-long explains the rates decision following a quarterly policymaking meeting in Taipei Thursday. CNA photo Sept. 21, 2023
Central Bank Governor Yang Chin-long explains the rates decision following a quarterly policymaking meeting in Taipei Thursday. CNA photo Sept. 21, 2023

Since March 2022, the Taiwan central bank has raised its rates by 75 basis points to combat rising inflation.

The central bank said as inflationary pressure remains in place worldwide, it is essential to monitor the effects of tightening monetary policy on the economy.

The decision not to alter the interest rate comes as Taiwan's inflationary pressure is less than that in the United States, where the Federal Reserve also decided to leave the rate unchanged overnight following a two-day policy meeting, but hinted that high-interest rates will last longer than earlier anticipated amid continued inflationary pressure.

The central bank has predicted Taiwan's consumer price index (CPI) will grow 2.22 percent in 2023, while core CPI, which excludes food and energy, is expected to rise 2.44 percent, both figures above the 2 percent alert level set by the bank.

In 2024, local CPI growth is expected to moderate to 1.83 percent and core CPI growth is forecast to slow down to 1.73 percent.

Sept. 6: CPI growth hits 7-month high, topping 2% in August

Despite the decision to leave interest rates unchanged on Thursday, Yang told reporters that the local central bank's efforts to tighten its monetary policy could continue for a longer time.

Although the central bank has forecast CPI growth to fall below the 2 percent mark in 2024, Yang said the average CPI growth in 2021 and 2022 hit 1.97 percent and 2.95 percent, respectively. Along with the 2.22 percent increase expected in 2023, the longer-term growth average could be boosted to 1.5 percent from 1 percent.

Yang said if longer-term CPI growth stays high, the central bank will have to be prudent in terms of its monetary policy, particularly at a time when consumer prices are volatile due to geopolitical tensions, climate change and global trade.

Yang added some of the board directors reminded the central bank in the latest policymaking meeting to pay close attention to possible inflationary pressure, while emphasizing any decision will be "data dependent."

Although the central bank did not come up with new measures to rein in the local property market Thursday, it said that after the five recent rounds of selective credit controls, risks had been reduced to an extent, and that the bank will continue to monitor how the market evolves before deciding whether new measures are needed.

On Thursday, the Executive Yuan approved amendments to the House Tax Act that will raise the house tax on households owning vacant residential properties to rein in market speculation.

Sept. 21: Cabinet approves draft law to raise tax on hoarding homes

Effective from July 1, amendments to the Equalization of Land Rights Act aim to clamp down on speculation in the market through the conditional prohibition of transfers or reselling of purchase orders for pre-sold homes and newly constructed homes.

These measures are expected to help the property market experience a soft landing.

From the central bank's point of view, Yang said it is not good for massive funds to flock into the property market because it could create bubbles in the home market and drain liquidity among enterprises, affecting the economy and the financial market.

(By Pan Tzu-yu and Frances Huang)


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