Central bank ups GDP growth forecast, eases selective credit controls

Taipei, March 19 (CNA) Taiwan's central bank on Thursday sharply raised its forecast for growth in Taiwan's gross domestic product (GDP) for 2026 to 7.28 percent, while easing selective credit controls in the home market.

After wrapping up a quarterly policymaking meeting, the central bank said in a statement Taiwan's economy is expected to benefit from a robust export performance and an increase in private investment during the current AI boom to grow 7.28 percent, an upgrade from the previous estimate of 3.67 percent made in December.

The upgrade is in line with the Directorate General of Budget, Accounting and Statistics (DGBAS), which raised its forecast for Taiwan's GDP growth in 2026 from 3.54 percent in November to 7.71 percent in February.

The central bank said that while the government has cut commodity taxes for select goods, with service cost growth likely to continue to moderate, the war in the Middle East has pushed up international crude oil prices, which could complicate local consumer prices.

By taking into account government price stabilization measures to cap energy prices, the central bank said it has raised the 2026 consumer price index (CPI) growth forecast from 1.63 percent to 1.80 percent and also increased the forecast for core CPI, which excludes vegetables, fruit and energy, from 1.63 percent to 1.75 percent.

After the hikes, CPI and core CPI growth are still below the 2 percent alert level set by the central bank.

At the policymaking meeting, the bank decided to leave its key interest rates unchanged for the eighth consecutive quarter, citing stable inflation.

The central bank said the decision also took into account uncertainties created by the military conflict in the Middle East and the U.S. tariff policies.

After the decision, Taiwan's discount rate remains at 2 percent, still the highest level in 15 years, with the rate on accommodations with collateral at 2.375 percent and the rate on accommodations without collateral at 4.250 percent.

Meanwhile, the central bank said following its imposition of a seventh round of credit control measures on the home market in September 2024 to rein in home prices, credit controls will now be partially eased.

Starting from Friday, the loan-to-value ratio -- the percentage of the value of a home that can be carried in a mortgage -- for individual buyers for their second-home mortgages will be raised from 50 percent to 60 percent.

Despite the easing of the loan-to-value ratio, the central bank said no grace period is allowed for individual buyers who already own a home but will buy a second one, which means they will be required to pay interest and the principal at the same time.

After a series of selective credit control measures, home mortgages extended by Taiwanese banks accounted for 36.0 percent of their total lending at the end of February, from a high of 37.6 percent at the end of June 2024, the central bank said.

In addition, the growth of banks' aggregate lending to the property market also fell to 3.7 percent at the end of February from a high of 9.4 percent as of the end of September 2024, the central bank added.

The bank said it will continue to monitor the local property market and review the effects of its selective credit control measures to stabilize local financial markets and improve the operations of the banking sector.