Taiwan’s gross domestic product (GDP) is expected to grow by at least 2 percent in 2023 and there is no fear that the country will fall into a stagflation trap, Yang Chin-long (???), governor of the local central bank, said on Wednesday.
Speaking at a hearing held by the Legislative Yuan’s financial committee, Yang said research institutions at home and abroad had estimated that Taiwan’s GDP will grow by 2.2 percent on average in 2023, and that unless the global economy deteriorated at a fast pace, it was possible for the local economy to maintain 2-percent growth or higher this year.
There are growing concerns over possible stagflation in Taiwan after the Directorate General of Budget, Accounting and Statistics (DGBAS) in late February lowered its forecast of the country’s GDP growth forecast by 0.63 percentage points from its previous estimate made in November to 2.12 percent, saying that weakening global demand would affect the exports-oriented local economy.
The DGBAS, however, has raised the local consumer price index (CPI) growth estimate to 2.16 percent, an upgrade of 0.3 percentage points from its earlier target, and above the 2 percent alert set by the central bank.
In early February, Chen Nan-kuang (???), deputy governor of the central bank, said in an article published in Taiwan Banker magazine that the central bank should have acted more aggressively in its monetary policy to fight inflation as the country could fall into stagflation.
Since last March, the central bank has raised its key interest rates by 62.5 basis points, while the U.S. Federal Reserve has increased rates by 450 basis points.
When asked by lawmakers about Chen’s criticism, Yang said stagflation refers to when inflation keeps on rising but the economy is faced with downside risks or even contracts. However, Taiwan is not facing this situation as the local economy grew last year and will continue to grow this year with inflation likely to be tamed to some extent, Yang said.
In 2022, Taiwan’s GDP grew by 2.45 percent and the CPI rose by 2.95 percent.
In a written report submitted to the Legislative Yuan last week, the central bank said that CPI growth could fall to around 2 percent in 2023, which was a more upbeat forecast than the DGBAS.
Citing Chu Tzer-ming (???), head of the DGBAS, Yang said as the Legislative Yuan has passed a special bill that could boost local economic momentum and lift GDP growth to almost 2.5 percent in 2023.
The bill is expected to allocate NT$380 billion (US$12.42 billion) from last year’s tax surplus for post-COVID-19 economy recovery, which includes a provision to issue NT$6,000 cash handouts to all nationals and tax-paying permanent residents.
Under such circumstances, Yang said Taiwan’s economy will grow at a mild and stable pace this year.
Commenting on the central bank’s monetary policy, Yang said the bank would take into account a wide range of factors such as the local economic growth and inflation, other countries’ policy-making decisions, changes in commodity prices, geopolitics, and the impact resulting from climate change, and that its policy is subject to adjustments.
Yang also described the central bank’s current monetary policy as “appropriate.”
Source: Focus Taiwan News Channel