DGBAS Ups Taiwan's 2014 GDP Growth Forecast to 2.98%

2014/05/30 | By Ken Liu

The Directorate-General of Budget, Accounting and Statistics (DGBAS) of the Executive Yuan, Taiwan's Cabinet, recently raised its forecast for the island's gross domestic product (GDP) growth this year to 2.98%, up by 0.16 of a percentage point from February's 2.82% forecast.

The improved forecast is due to an anticipated growth in personal consumption resulting from pay hikes and stock market gains. However, the increased figure remains below the 3% level because of lagging economic growth in developing economies.

DGBAS officials noted that the island's average salary was NT$54,000 (US$1,800 at US$1:NT$30) per month in the first quarter, up 5.5% from the same quarter of last year. Retail investors also gained from the recent stock-market surge through the 9,000-point milestone.

The income gains will lead to a 2.58% growth in Taiwan's personal consumption spending this year, predicts DGBAS.

Nevertheless, the organization estimates that the island's personal spending on food products will rise only 1.36% year on year due to a considerable surge in food prices in recent months, the lowest growth in food spending in six years. Personal spending on non-food products, however, is projected to grow at a three-year-high rate of 2.74%.

DGBAS officials pointed out that the island's pork prices have risen sharply since beginning of this year due to serious piglet diarrhea across the island. Also, the island's chicken and fruit prices have gone up considerably due to supply shortages.

Price hikes of these agricultural products have increased costs at eateries, which have consequently boosted their own prices. As a result, DGBAS recently predicted that the island's consumer price index (CPI) would rise 1.53% this year, up 0.46 of a percentage point from the figure it forecast in February.

While economies in Europe and the United States are warming up, those in developing economies, especially mainland China, Russia, India, and Brazil, are cooling off, somewhat curbing the growth of Taiwan's export-driven GDP.

Based on slower economic growth in developing economies and rising political and social instability in Thailand and Vietnam, as well as an increased growth in personal consumption in Taiwan, DGBAS believes that growth and potential risk will both affect the island's GDP this year.

DGBAS recently announced that Taiwan's GDP grew 3.14% year-on-year in the first quarter, and projected growth rates of 2.79%, 2.96%, and 3.01% in the second, third, and fourth quarters.

Some people in Taiwan fear that a halt in construction of the fourth nuclear power plant would affect the island's GDP, DGBAS officials stated that they did not take such an event in consideration when forecasting this year's growth rate.

Officials of Taiwan's Central Bank feel that DGBAS's growth forecast for this year is excessively conservative, especially compared with the 3.1-4% growth range forecast by several banks. The officials believe that domestic consumer spending will increase given the improved unemployment situation. (KL)

DGBAS's Forecast of Taiwan's 2014 Economic Performance

Item

GDP growth (%)

Personal consumption growth (%)

Private investment growth (%)

Goods & services export growth (%)

CPI growth (%)

2014

2.98

2.58

4.73

4.08

1.53

3.14

2.70

2.24

3.89

0.80

2.79

2.50

6.09

3.32

1.53

2.96

2.51

7.45

5.11

1.79

3.01

2.60

2.93

3.99

1.97

Source: DGBAS