Academia Sinica, Taiwan's top research institution, has forecast economic growth of 3.85 percent for Taiwan in 2022, and also raised its 2021 growth forecast to 6.04 percent.
In a report issued Wednesday, the institute revised its previous 2021 forecast of 5.05 percent upwards based on mass COVID-19 vaccination campaigns launched around the world, the gradual economic recovery, and the improving domestic COVID-19 situation.
The upward adjustment was also made in light of expanding foreign trade, driven primarily by the acceleration of infrastructure projects and digital transformation in major countries.
Due to supply chain bottlenecks and inflation risks, the global economic recovery is expected to lose momentum in 2022, according to Chou Yeu-tien (???), a research fellow at the institute.
However, with the gradual increase in Taiwan's vaccination rate, consumption is expected to pick up and help Taiwan achieve sustained economic growth, Chou added.
Considering a relatively high base of comparison this year, the real economic growth rate in 2022 is expected to reach 3.85 percent, according to Chou.
Academia Sinica's 3.85 percent is a conservative estimate compared to the 4.15 percent forecast by the Directorate-General of Budget, Accounting and Statistics, and the central bank's 4.03 percent.
The latest GDP growth forecasts made by major domestic think tanks were all set at higher than 4 percent.
Academia Sinica is the country's only economic research institute to forecast an increase in domestic inflation of more than 2 percent for 2022.
Along with estimating increases of 2.01 percent and 9.55 percent in the Consumer Price Index (CPI) and Wholesale Price Index (WPI), respectively, for the whole of 2021, the institute has also forecast a 2.04 percent CPI increase and 4.04 percent WPI increase for 2022.
Explaining the relatively high inflation forecast, Chou said the rapid spread of the Omicron COVID-19 variant in many countries was expected to exacerbate global supply chain issues, putting immense pressure on logistics and the production system and causing an imbalance between supply and demand.
If inflation gets worse in the United States -- a major trading partner of Taiwan -- domestic inflation is unlikely to ease, Chou noted.
Recent WPI growth was relatively high due to soaring production costs, which are also expected to impact consumer prices in the near future, Chou said.
In addition, skyrocketing house prices in Taiwan this year are expected to impact rent levels next year and push the CPI past the 2.0 percent warning line next year, he said.
Chou added that Taiwan's looming minimum wage hike and public and private sector pay growth would likely drive up consumer demand and put increasing pressure on prices.
The institute pointed to COVID-19, the central bank's fiscal policy, U.S.-China relations, and the long-term implications of climate change as areas of uncertainty likely to affect Taiwan's economy.
Source: Focus Taiwan News Channel