Economy
Taiwan growth quickens, raises inflation outlook
Updated: 2011-05-03 10:27
By Chinmei Sung (China Daily)
TAIPEI - Taiwan raised its inflation forecast after the island's economy grew faster than estimated, adding pressure for a further increase in interest rates.
Gross domestic product climbed 6.19 percent in the three months through March from a year earlier, after rising 6.92 percent in the fourth quarter, the statistics bureau said in a preliminary estimate released in Taipei on Friday. The median prediction in a Bloomberg News survey of 17 economists was 5 percent, following an expansion of more than 10 percent in 2010.
Interest rates rose for the fourth straight quarter last month and signaled scope for further increases even as Japan's earthquake threatens to disrupt trade and tourism.
Taxes were levied on property investors after housing prices surged to a record, and will boost civil servants' pay in July to help them cope with higher costs.
"Asian economies are more vulnerable to surges in oil and food prices, because they depend more on oil imports than developed economies," said Tony Phoo, an economist at Standard Chartered Plc in Taipei.
Capital inflows have contributed to a 7 percent rise in Taiwan's dollar in the past six months, the biggest climb in Asia, helping pare import costs while risking export competitiveness.
The island raised its 2011 inflation prediction to 2.18 percent on Friday from 2 percent and increased the GDP forecast for the year to 5.04 percent from 4.92 percent.
Economic growth in Asian economies including the Chinese mainland, South Korea, Singapore and Vietnam slowed last quarter from a year earlier, while proceeding at a pace sufficient to propel the cost of living higher and bolster the case for tighter monetary policy through further rate increases or currency gains.
Borrowing costs and currencies need to rise in Asia to restrain inflation and prevent its "robust" economies from overheating, the International Monetary Fund said last week.
The benchmark rate will be raised to 2.25 percent by the end of March next year from the current 1.75 percent, according to the median estimate in another Bloomberg survey.
Inflation climbed to a four-month high of 1.41 percent last month, while existing home prices in Taipei may fall for a second straight month in April after rising to a record last year, according to Sinyi Realty Co, Taiwan's biggest property broker by market value.
Exports are equivalent to about two-thirds of Taiwan's $355 billion GDP and may face disruption after Japan's March 11 earthquake affected Asian trade flows. Export growth eased to 19.5 percent in the first quarter from a year earlier, compared with 20.9 percent in the previous three-month period.
Monetary tightening on the mainland and a US slowdown, where growth moderated to 1.8 percent last quarter, could also crimp demand.
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