A Taiwanese think tank on Tuesday lowered its forecast for the island's 2012 economic growth rate to 3.55 percent from 4.07 percent in light of recent hikes in fuel and electricity prices and shrinking global demand for its goods.

The Chung-Hua Institution for Economic Research (CIER) also predicted that the island's consumer price index (CPI), a main gauge of inflation, will rise to 1.93 percent from an earlier forecast of 1.48 percent.

Liu Meng-chun, director of the CIER's Center for Economic Forecasting, said the price hikes' impact on Taiwan's economy will be short-lived, although they will hamper the island's endeavors to battle inflation and attract more investment.

The European debt crisis, instability in the Middle East, and slower economic growth on the Chinese mainland will all take a toll on Taiwan's exports, according to Liu.

Despite weak public investment, private businesses in Taiwan will show a stronger will to spend money as a result of increasing mainland investment on the island and its industrial links with Japan, according to Liu.

Furthermore, the implementation of the Economic Cooperation Framework Agreement (ECFA), a wide-ranging economic pact that facilitates trade between the Chinese mainland and Taiwan, will help to expand Taiwan's export market, according to Liu.

In February, Taiwan's statistical authorities slightly lowered their forecast for the island's 2012 economic growth rate amid worries about the slow recovery of the global economy.

Statistical authorities modified the island's gross domestic product growth rate in 2012 to 3.85 percent from the 3.91-percent figure predicted in January. In 2011, Taiwan's economic growth rate was 4.04 percent.