Taipei, April 22 (CNA) Singapore-based DBS Bank has raised its forecast for Taiwan’s consumer price index (CPI) to 2 percent for 2023 and has not ruled out the possibility that Taiwan’s central bank will continue to raise rates at its next quarterly meeting in June.

While DBS left its forecast for Taiwan’s 2023 gross domestic product (GDP) growth unchanged at 1.6 percent, it revised upwards its forecast for the CPI’s rise to 2.0 percent, from 1.8 percent in an estimate made in January.

Also in January, DBS cut its forecast for Taiwan’s 2023 GDP growth from 2.3 percent to 1.6 percent, citing weakening global demand.

DBS senior economist Ma Tieying (馬鐵英) said at a news conference earlier this week that Taiwan’s economic slowdown was expected to continue even as it remained troubled by rising consumer prices.

She said Taiwan’s core CPI, which excludes vegetables, fruits and energy, remained above 2 percent for the 12th month in a row in March, the longest duration since 2008, while the rise in service costs also topped 2 percent for the 12th consecutive month, the longest period in about 20 years.

An average 11 percent hike in electricity rates starting April 1 was expected to put more upward pressure on Taiwan’s CPI growth, Ma said, adding that higher power rates could increase inflation by 0.2 percentage points alone in 2023.

If the core CPI continued to remain above 2 percent in April and May, Ma said, inflationary pressures could prompt the central bank to raise its key interest rates again in June.

At its March quarterly policymaking meeting, the central bank raised its key interest rates by 12.5 basis points to push up the discount rate to 1.875 percent.

Since March 2022, the central bank has increased interest rates by 75 basis points to take on inflation.

Ma said that even if the central bank were to increase the discount rate to 2 percent in June, after adjusting for inflation, Taiwan’s real interest rates would still be zero.

According to DBS, Taiwan’s CPI growth should hit its peak in the first quarter and then moderate over the following three quarters but still come closer to 2 percent.

Commenting on the bank’s GDP growth forecast, Ma said a fall in exports would continue to weigh on the economy this year, and it was even possible Taiwan could report an economic contraction in the first quarter.

In the fourth quarter of 2022, Taiwan’s GDP fell 0.41 percent according to the Directorate General of Budget, Accounting and Statistics (DGBAS).

If Taiwan’s economy continued to show negative growth in the first quarter of 2023, Taiwan would technically fall into recession, Ma said.

Starting from the second quarter, however, Taiwan should benefit from growing momentum in consumption and less of a year-over-year decline in exports, and GDP growth should turn positive, rebounding to more than 3 percent by the fourth quarter, according to Ma.

In February, the DGBAS forecast Taiwan’s GDP to grow 2.12 percent and the CPI to rise 2.16 percent in 2023.