The local central bank has lowered its forecasts of Taiwan’s gross domestic product (GDP) growth for 2022 and 2023, which it announced after wrapping up a quarterly policymaking meeting Thursday, citing a weakening global economy to push down demand and hurt the export-oriented economy.
The central bank has lowered the GDP growth forecast for 2022 to 2.91 percent from its previous estimate of 3.51 percent, while the growth forecast for 2023 has also been cut to 2.53 percent from 2.90 percent.
As Taiwan is losing export growth momentum as the country reported a year-on-year decline in outbound sales for the third month in a row in November, private investment has also been affected, the central bank said.
The central bank said downside risks for 2023 have been on the rise, and in the wake of persistent geopolitical tensions and a worsening climate change, worldwide inflation is expected to continue to pose uncertainty in the global economy next year.
The revised forecast showed the central bank was more cautious than the Directorate General of Budget, Accounting and Statistics (DGBAS). In November, the DGBAS cut its forecast for Taiwan’s gross domestic product (GDP) growth for 2022 by 0.70 percentage points from its previous estimate to 3.06 percent, and lowered the 2023 forecast by 0.30 percentage points to 2.75 percent.
“The magnitude of the downgrade in the GDP growth forecasts by the central bank appeared apparent,” Yang Chin-long (???), governor of the central bank, told reporters in a news conference right after the quarterly policymaking meeting. Therefore, “the latest rate hike was limited,” compared with the U.S. Federal Reserve’s hike, he said.
In the meeting, the central bank raised its key interest rates by 12.5 basis points, marking the fourth consecutive quarter with a rate increase during the current rate hike cycle, which had been widely anticipated by the market.
Since March, the local central bank has raised rates by 62.5 basis points, while the Fed has boosted rates by 425 basis points.
After the latest rate increase, the central bank’s discount rate will rise to 1.750 percent, while the rate on accommodations with collateral will grow to 2.125 percent, and the rate on accommodations without collateral will rise to 4.0 percent, according to the bank.
The rate hike is scheduled to go into effect on Friday.
After the rate increases, the central bank still expects the local consumer price index to grow by 2.93 percent in 2022, above the 2-percent alert level set by the bank, with the core CPI, which excludes fruit, vegetables and energy, forecast to hit 2.59 percent.
But inflationary pressure is expected to fade in 2023, when the CPI growth is expected to fall below the 2-percent mark to 1.88 percent with the core CPI also likely to drop to 1.87 percent as supplies in the global supply chain are expected to improve and international crude oil prices are forecast to move lower.
The central bank did not introduce any new select credit control for the home market after Thursday’s meeting concluded. Since December 2020, the central bank has imposed four rounds of select credit control in a bid to cool down the property market and rein in rising home prices.
Yang said the local property market had begun to feel the impact from the select credit control measures this year with sales volume on the decline.
Yang added while it will take some time for home prices to fall, “I expect that a soft landing in the local property market will come in the first half of next year.”
He said the select credit control measures would remain in place in the home market for some time.
After the latest rate hike, Lang Mei-nan (???), a research manager with Great Home Realty, said the average mortgage rate of the major banks in Taiwan was expected to rise to 1.952 percent and home buyers with a 20-year home loan worth NT$10 million (US$326,797) were expected to pay an additional NT$2,665 in interest a month.
Source: Focus Taiwan News Channel