CIER Raises Taiwan's 2015 GDP Growth Forecast to 3.56%

The Taiwan government-funded Chung-Hua Institute for Economic Research (CIER) raised its forecast of Taiwan's gross domestic product (GDP) growth to 3.56 percent year-on-year for 2015 from the previous 3.50 percent.

The CIER's latest forecast is higher than the International Monetary Fund's (IMF) 3.5 percent counterpart but lower than the 3.78 percent projected by the Directorate-General of Budget, Accounting and Statistics (DGBAS) of the Taiwan Cabinet.

CIER attributes the strong growth forecast of the island's GDP for 2015 mostly to the higher growth forecasts of the island's private consumption and private investment, each raised to 3.02 percent from the previously projected 2.78 percent, and 6.02 percent from 5.59 percent year-on-year.

CIER says that the higher private consumption and private investment forecasts suggest domestic demand is constituting an increased portion of Taiwan's GDP, accounting for 82.1 percent of the GDP in 2014, also having risen 0.53 of a percentage point in 2011, 0.59 of a percentage point in 2012, 1.86 percentage points in 2013 and 3.07 percentage points in 2014.

Foreign demand, in contrast, is comprising a lower portion of Taiwan's GDP, dropping to only 17.9 percent in 2014 from 2011's 88 percent to confirm recent reports that global trade is negatively impacting Taiwan's economy, with such decreases indicative of sagging exports, according to the institute.

According to CIER President Wu Chung-shu, the upward revision of Taiwan's 2015 GDP growth forecast shows buoyant outlook of the local economy, and that the think tank remains upbeat about the prospects of the local information and communication technology sector, which is expected to continue to drive Taiwan's economic growth.

The think tank says as global major central banks continue to adopt quantitative easing by buying bonds or pumping liquidity into markets, whereby such capital can trickle down as investments in equity markets and easier loans to small businesses that can result in growth in Taiwan's private consumption and investments.

While CIER has raised its growth forecast of Taiwan's private consumption and investment for 2015, it has cut its prediction for Taiwan's exports based on the lackluster export data for the first quarter.

In the January-March period, Taiwan's exports fell 4.2 percent from a year earlier to US$70.25 billion mostly as result of plunges in crude oil prices that dipped as low as around US$45 a barrel a few months ago, to have eroded sales revenue of the island's chemical and rubber product exports.

The institute has cut its growth forecast of the island's merchandise and service exports for 2015 to 6.26 percent from a 7.35 percent increase as projected earlier, with it lowering also the growth prediction of the island's merchandise and service imports to 5.58 percent from 6.36 percent.

For 2016, CIER predicts Taiwan's economy to grow a moderate 3.41 percent.