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COST OF LIVING/Core CPI up faster over past three years than before: Central bank

04/09/2024 03:12 PM
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CNA photo March 26, 2024
CNA photo March 26, 2024

Taipei, April 9 (CNA) A research report by Taiwan's central bank has concluded what most consumers already knew intuitively -- that prices for basic goods have risen faster since the COVID-19 pandemic hit than before it.

The report found that from 2013 to 2019, before the outbreak of COVID-19, Taiwan's core consumer price index (core CPI), which excludes fruit, vegetables and energy, grew about 1 percent every 17.19 months, but the pace accelerated to every 7.98 months from 2021 to 2023.

The central bank attributed the faster rise in core CPI to the pandemic's disruption of supply chains, causing shortages of some goods, as well as geopolitical tensions and climate change, though the report did not elaborate on how those factors specifically affected Taiwan.

During the 2013-2019 period, only 105 items monitored by the government grew more than 2 percent year-on-year on average, accounting for about 28.53 percent of the 368 items watched by the government, the central bank said.

From 2021 to 2023, however, 179 items out of the 368 items monitored by the government rose more than 2 percent year-on-year on average, or more than 48.64 percent of the total, an indication that inflationary pressures spread to more basic goods, the report said.

Core CPI rose 1.33 percent in 2021, 2.61 percent in 2022 and 2.58 percent in 2023, compared to overall CPI increases of 1.97 percent in 2021, 2.95 percent in 2022 and 2.49 percent in 2023.

The central bank acknowledged that many consumers have been skeptical of those numbers, and it attributed some of those doubts to a steady rise in dining-out expenses, a common cost of living for many Taiwanese.

Increases in the costs of eating out are often resistant to change, the central bank said, and could stay stubbornly high in the future.

According to the central bank, Taiwan's CPI could rise by more than 2 percent again in 2024, largely due to an average 11 percent increase in electricity rates, which took effect on April 1.

After the government announced it would raise electricity rates, the central bank raised its forecast for CPI and core CPI growth for 2024 to 2.16 percent and 2.03 percent, respectively, on March 21, from 1.89 percent and 1.83 percent forecast in December.

Chu Tzer-ming (朱澤民), head of the Directorate General of Budget, Accounting and Statistics (DGBAS), concurred with the central bank's assessment.

At a legislative hearing on March 25, he forecast that Taiwan's CPI could grow 2.03 percent in 2024, compared with an earlier DGBAS estimate of a 1.85 percent in February, due to the higher cost of electricity.

To prevent an increase in the CPI, the central bank surprised analysts in March by raising its key interest rates by 0.125 percentage points, with the benchmark discount rate rising to 2 percent, the highest in 15 years.

Central bank governor Yang Chin-long (楊金龍) admitted that the rate hike was aimed at taking on potential inflation caused by the higher electricity rates.

In the first two months of 2024, the CPI rose 2.43 percent from a year earlier after a 3.08 percent spike in February -- when the Lunar New Year holiday sparked heavy consumption, putting upward pressure on prices.

The DGBAS is scheduled to release March inflation data Tuesday afternoon.

(By Pan Tzu-yu and Frances Huang)

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