Planners work to counter economic fallout

The nation's top economic plan-ners said yesterday they are working on a plan to minimize the economic fallout from the terrorist attack in the US.

"If the US economy is hurt severely by the recent terrorist assault on the US, it could also seriously undercut Taiwan's economic recovery," Chen Po-chih (陳博志), chairman of the Council for Economic Planning and Development, said yesterday.

Economists from the agency are working on a contingency plan to eliminate possible "insufficiencies resulting in a further slump in external demand" for Taiwan products, Chen said.

The news follows a terrorist attack that destroyed the World Trade Center in New York and partially damaged the Pentagon in Washington.

The economic planning body's No. 3 man said that a strike on the financial heart of the US will have an impact on that country's economic growth.

"The US may now report negative GDP growth this year, which in turn would continue to exacerbate the current global slowdown for another three months or more," said Thomas Yeh (葉明峰), secretary-general.

The financial impact of the blow to US confidence may trigger a drop off in consumer spending, which would further hamper Taiwan's economic growth as the nation's economy is dependent on exports, mostly to the US.

"Since 24 percent of Taiwan's exports are to the US, the demand in the US market is very important to Taiwan's economy," said Neal Stovicek, an analyst at National Securities (建弘證券).

Yeh said he believes the recovery in Taiwan may not happen soon, as the "general expectation that the US economy will bottom out during the Christmas shopping season is quickly vanishing."

In line with that scenario, Taiwan's economy could contract more than 1 percent this year, a Chinese language newspaper reported yesterday, citing unidentified sources at the Directorate General of Budget, Accounting and Statistics.

In July, the Directorate General predicted third quarter economic growth would contract 2.45 percent and 0.37 percent for the year.

But with the US tragedy factored in, the Directorate General official said it would be hard to maintain a positive growth rate in the fourth quarter.

According to Chen Po-chih, his agency's economists are mapping out strategies to increase domestic demand in the hope that a boost in consumption will help fill in expected insufficiencies caused by possible decreases in trade with the US. While pundits sought to assess the economic damage from the attack, the most common theme was that a great deal of uncertainty still remains.

"We have never seen people rattled like this before. Whether the financial shock will have a long-term effect, nobody knows for sure," said Chris Irwin, vice president of Taiwan Ratings Corp (中華信評).