Academia Sinica yesterday said Taiwan's GDP growth rate will contract by 1.89 percent, a revision from its earlier prediction of 2.38 percent.
It also projected next year's GDP growth to hit 3.08 percent based on estimated export growth of 6.76 percent -- a far brighter prediction than the 0.7 percent economic growth forecast by the IMF on Tuesday.
"This year, Taiwan will be experiencing the lowest GDP growth rate in four decades," said Wu Chung-shu (吳中書), a research fellow at Academia Sinica's Institute of Economics -- the nation's highest research body.
"However, we are very optimistic about a modest economic recovery next year," he said at a press conference yesterday morning, held to address the nation's economic outlook for next year.
The economic research institute predicted that the nation's economic recession will bottom out in the fourth quarter, following a "not-too-weak" US-led economic recovery.
"In the US, new housing start-ups and retail sales have shown greater-than-expected growth as consumer confidence begins to stage a rebound," Wu said.
Wu said domestically, both the TAIEX and consumer confidence have been rising and the monthly decline of exports orders since March is slowing -- indicators that support the institute's prediction for next year's high economic growth.
"We are upbeat on [Taiwan's] export growth," Wu said, "especially with exports of electrical and information products picking up."
Next year's expected 6.76 percent export growth rate is a big boom over last year, when it shrank by 9.3 percent.
But private investment is forecast to decrease by 23.12 percent this year and only returns to 2.06 percent next year he added.
Cash-strapped banks simply don't have the money to lend.
"Increasing non-performing loans have attributed to financial institutions' unwillingness to lend more money to traditional industries," Wu told reporters.
The institute, however, yesterday warned the nation that high unemployment would continue, which Wu said would be as high as 5 percent on average.
Wu said that the groups hardest hit by the unemployment rate are those under age 25 and middle-aged people with less education, who rely on job opportunities from traditional industries.
"Due to the rising unemployment, domestic demand will still be weak next year," Wu said.
Consumer growth will be 3.21 percent -- far from the past growth of between 6 to 7 percent.
Commenting on the central bank's interest rates, Wu said that he saw no room for the interest rate to rise next year since GDP is normal, inflation is unlikely and assets allocations -- especially in the property market -- are not stabilized.
"Next year's interest rate will be lower than this year's," Wu concluded.
RSS