Taiwan's central bank sees strong economic growth, stable inflation

TAIPEI (Reuters) - Taiwan's central bank said on Wednesday it sees domestic economic growth as strong and inflation as stable as the global economy improves, though uncertainty facing the United States and Europe in politics and economic policy remains a challenge.

The central bank comments came days after the export-reliant island raised its 2017 economic growth outlook to a three-year high. However, the government has warned of risks to its fresh forecasts such as currency volatility, China's economic adjustments and the global impact of policy changes under U.S. President Donald Trump.

"We will continue to monitor economic and financial changes and adopt appropriate monetary and forex exchange policy," the central bank said in a report, which is based on the its evaluation of possible impacts from global economic and financial situation from January 2016 to this April.

The central bank cautioned that corporate borrowing costs would rise and profitability would fall if there is a volatile shift of foreign fund flows to outflows, the report said.

Massive foreign fund inflows have helped push Taiwan's main stock index <.TWII> to a 17-year closing high earlier this month.

The report highlighted the central bank's concern that a sudden shift to fund outflows would hurt local companies.

(Reporting by Loh Liang-sa; Writing by Faith Hung; Editing by Gopakumar Warrier)

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