TAIPEI (TVBS News) — Taiwan's inflation rate could breach the 2% threshold this year if proposed electricity price increases take effect, according to the Taiwan Institute of Economic Research (TIER, 台經院). The influential think tank emphasized on Tuesday (March 25) that such inflationary pressure would originate from supply-side constraints rather than excessive economic demand. This distinction is crucial for policymakers weighing the broader economic implications of utility price adjustments, as supply-driven inflation typically requires different mitigation strategies than demand-driven price increases.
The electricity price review committee is scheduled to meet this week amid heightened public scrutiny over potential inflation effects. Economists note that Taiwan's robust economic growth projection of 3.14%, as calculated by the Directorate General of Budget, Accounting and Statistics (DGBAS, 主計總處), would still comfortably outpace any anticipated price increases. This growth cushion provides Taiwan's economy with some resilience against moderate inflation, though consumers remain concerned about rising utility costs amid global energy market volatility.
TIER president Chang Chien-yi (張建一), speaking at an economic outlook briefing, revealed that the institute's January projections had estimated Taiwan's annual inflation at 1.95%. The anticipated electricity rate adjustments could nudge this figure above the psychologically significant 2% mark. "Despite crossing this threshold, the inflation rate would remain manageable when viewed against our projected economic expansion," Chang noted. The differential between growth and inflation rates suggests Taiwan's economy would maintain positive real growth even after accounting for price increases.
The structural financial challenges facing Taiwan Power Company (Taipower, 台電) have prompted the Ministry of Economic Affairs (經濟部, MOEA) to pursue subsidy solutions, according to Chang. He pointed to Taipower's concerning debt burden as justification for more cost-reflective pricing models. "Even if electricity prices rise, it merely reduces Taipower's losses," Chang emphasized, framing the adjustments as financial necessities rather than profit-seeking measures. Taiwan's central bank has calculated that an 8% electricity price increase implemented in April would contribute approximately 0.07 percentage points to the annual inflation rate, a relatively modest impact on overall consumer prices.
Despite the inflation concerns, Chang expressed confidence in Taiwan's economic outlook, pointing to robust export performance and strong investment flows. Domestic consumption has shown resilience, particularly in cultural and entertainment sectors where post-pandemic spending has accelerated. Nevertheless, Chang tempered his optimism with warnings about external risks, specifically highlighting potential disruptions from U.S. President Trump's economic policies. These policies could introduce significant uncertainties into global trade patterns and create volatility in markets critical to Taiwan's export-oriented economy, potentially requiring adjustments to current growth projections.
