Analysts say growth plan should work

A public spending plan unveiled on Thursday may help boost the nation's economic growth, and analysts laud the move as a step in the right direction.

"This is a definitely a good move. One hopes the government is more aggressive," said Franklin Poon, an economist at ABN AMRO Securities in Hong Kong.

Faced with a slowing economic growth and a rising jobless rate, the government announced it will increase public spending by NT$800 billion. The Cabinet thinks the move will help create 38,000 new jobs.

"We are keeping our growth forecast unchanged since the new public spending project was announced," said William Overholt, chief Asia strategist for Nomura International in Hong Kong. Nomura expects Taiwan's gross domestic product to grow by 4.6 percent this year.

Analysts said the deficit spending is the right measure given the mounting pressure from the public for the government to bolster the economy.

"Theoretically, fiscal stimulation is the appropriate measure," said Poon. "But my worry is whether the government will get the money."

ABN AMRO expects the GDP to grow by 4.4 percent. Analysts say the government may have to implement both fiscal and monetary measures to stimulate investment and consumption.

While the Central Bank of China (央行), which cut interest rates on Monday, is behaving more aggressively than its regional counterparts. Poon said it is not aggressive enough. The Bank of Korea, for example, is more focused on "reforms than on relaxing the monetary policy," Poon said.

Premier Chang Chun-hsiung (張俊雄) said on Thursday that the government will earmark NT$800 billion for infrastructure spending this year, a move that aims to increase the GDP by 0.7 percentage points this year.

Chairman of Council for Eco-nomic Planning and Development Chen Po-chih (陳博志) believes that the government's job-creation initiative last year has already added 40,000 jobs.

The extra spending, however, depends on an amendment to the budget law, which requires that the government's total budget deficit not exceed 15 percent of the total budget.

The premier wants at least 90 percent of all projects to begin before the end of the year.