The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth for this year from 5.16 percent to 5.84 percent on stronger exports, and urged policymakers to heed inflationary pressures spurred by a global economic recovery and loose monetary policies.
The plea came after the government announced a minimum wage hike of 5 percent from next year, and retailers and restaurants increased prices to reflect soaring oil, raw material and labor costs.
The latest growth projection is the highest in 11 years as Taiwan has been benefiting from a surge in demand for electronics amid trends toward remote working and distance learning amid COVID-19 restrictions.
Photo: CNA
The Taipei-based think tank said that the consumer price index (CPI) would rise to 1.84 percent this year, reversing a 0.24 percent contraction last year, when border controls were installed, halting almost all non-resident arrivals.
That would suggest a gain of 2.08 percentage points, higher than the central bank’s 2 percent alarm for monetary tightening.
“Policymakers should pay attention to inflation,” CIER president Chang Chuang-chang (張傳章) said. “While the issue is not yet serious, it is a focus of conversation.”
Many have complained about feeling the pinch and voiced concern that the situation might get out of control, Chang said.
An ongoing global economic recovery has pushed international oil and raw material prices higher, while supply deficiencies are also fueling the problem, the CIER said.
Concern over inflation might translate into reality, so the government had better be prepared, Chang said.
Cathay United Bank (國泰世華銀行) lead economist Lin Chi-chao (林啟超) said that climate change is adding to inflation worries.
This winter might be harsh, bolstering demand for coal and natural gas, Lin said.
That is why China has introduced power rationing to cope with energy shortages, Lin said, adding that snow fell in Japan’s Hokkaido Prefecture on Sunday, 17 days earlier than last year.
International fuel and commodity price hikes have played a big part in Taiwan’s CPI expansion, so the government must not take the situation lightly, he said.
Lin Chang-ching (林常青), who teaches economics at National Cheng Kung University, said that inflation in Taiwan does not look like it will be a short-term phenomenon, possibly persisting through the third quarter of next year.
Housing prices, although not a component of CPI, have picked up drastically in Tainan and would fan inflation expectations, he said.
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