The current global economy is not as good as we expected at the beginning of this year (2013). In the second quarter, more and more major institutions lowered down their forecasts on performance of the global economy of this year. The main reasons for such adjustments are that the emerging markets, leaded by China, started to show a slower pace of growth and recession of the Euro area was also more severe than expected. The IMF recently revised its forecast on the global economic growth of this year down to 3.1% in the World Economic Outlook. The IMF also thinks the global economy will suffer a growing pain in the second half of this year, which suggests that the global recovery is still in a difficult situation. As for Taiwan, the economic growth in the first quarter was not satisfactory. Exports and domestic consumption demands in the first quarter were not as strong as expected. However, the leading indicator has risen for 11 consecutive months, which suggests the growth momentum may recover in the second half of this year. We revise our forecast of annual GDP growth in 2013 to 2.35%, from our previous forecast of 3.05% in the end of 2012. In the following, we briefly discuss our forecasts for each GDP component.

　　For consumption in private sector, a low growth of real wage has caused consumers to limit their spending. A weak performance of sales and low consumer confidence suggest that outlook of the economy is still pessimistic. Accordingly, our forecast for annual growth of real private consumption in this year is 1.26%, which is 0.08% lower than our initial forecast in the end of 2012. As for investment, due to the expansion in the semi-conductor industry, investment demand on equipment is strong this year. Annual growth of imports of equipment reaches 8.5% in the first half of this year. In addition, the government continues to liberalize restrictions on investors from China, which is expected to substantially increase Chinese investments in Taiwan. However, due to uncertainty of the global economy, overall investments from foreign countries slightly decreased. Also due to a limitation on the government's budgets, investments from public sector continue to decline. To sum, we expect that real investments from private sector will largely increase, and its annual growth this year will reach 6.34%. If the government and state-own companies’ investments are included, our forecast for annual growth of gross fixed capital formation this year is 4.49%. 

　　As for international trades, the IMF continue to slash its forecasts on annual growth of trades on goods and services, since demands from Europe and the emerging markets decline and trade barriers still exist between countries. In the first half of 2013, performance of international trade was not as good as expected in Taiwan. Good exports only grew 2.2%, and imports had almost no growth. In the third quarter last year, the amount of exports had reached its highest level in history, which means that in the third quarter this year, it is a great challenge to break the record. In addition, it is expected that China economy will have a slower growth, and as such, it is still uncertain how performances of Taiwan's international trades will be in the second half of this year. However, the Taiwan government already started to use policies to obtain orders from foreign countries, and thus we are still optimistic on its trade performances. After taking impacts from inflation into account, we revise our forecast for annual growth of real goods and service exports up to 4.93%. We also expect that annual growth of real goods and service imports will be 5.17% and annual growth of trade surplus will reach 4.23%. 

　　As for price level, impacts from raises of gasoline and electricity prices last year had been gradually faded away and annual growth of CPI had dropped below 1% in the second quarter. In addition, the CPI level in previous year already had increased due to typhoons. Thus the CPI level is expected to be even more stable in the third quarter this year. However, in the fourth quarter the government will raise the electricity price again. Considering all these factors, our forecasts for annual growths of the CPI in the fourth quarter and the whole year are 1.76% and 1.24%, respectively. As for the wholesale price index (WPI), since demands from the emerging economies declined, price levels of the raw materials continued to drop in the first half of this year. Our forecast for the annual WPI growth this year is -1.81%.

　　As for money supply, since demands from domestic firms are expected to grow and performance of the stock market is stable, a gradual rise of funding demand is expected. Our forecasts for annual growths of M1B and M2 in 2013 are 6.17% and 4.94%, respectively. As for employment, condition of domestic labor market is gradually improved, and unemployment rate declines significantly. But in June and July students who will graduate from universities will enter the labor market, which will slightly increase the unemployment rate. Our forecast for the unemployment rate this year is 4.16%. 

　　In sum, the global economy in the second half of this year still faces some uncertainty. Will the emerging economies, leaded by China, lose their growth momentum? When will the Euro area get rid of the recession? Will the U.S. keep robust recovery? These uncertainty factors will affect performances of Taiwan economy in the second half of this year. In addition, whether the domestic consumer confidence continues to be strengthened or not affects the private consumption too. After considering forecast errors and the uncertainty factors, our 50% interval forecast for the 2013 GDP growth ranges from 1.13% to 3.71%.

　　Related websites:
http://www.econ.sinica.edu.tw/reports.php?searchYear=&searchStyle=&parentClassID=0&foreLang=en&parentMenuID=50&titleMenuID=109