Local think tank foresees growth

Amid global economic uncertainty, the nation's export-driven economy may continue to recover next year -- and it is expected to arrive at a gross domestic product (GDP) of 3.77 percent in 2003, a local think thank estimated yesterday.

"We are sure to undergo a mild recovery, but it may still be weak and volatile due to several economic variables -- specifically the US's possible declaration of war against Iraq," said Wang Lee-rong (王儷容), director of the Center for Economic Forecasting at the Chunghua Institute for Economic Research.

Wang added that it's still too early to predict the war's impact on the world economy because wars, in general, may bring destruction, but may also stimulate demand in the areas of private consumption and high-tech equipment -- to the benefit of export economies like Taiwan's.

But the think tank's reports warned that the nation's 2003 GDP may drop from an estimated 3.77 percent to 2.3 percent if a US-led war against Iraq does happen. On the contrary, if that dispute is to be resolved peacefully -- and if a peaceful relationship developed across the Taiwan Strait -- the figure may grow further to 5.7 percent in 2003.

The semi-official institute yesterday also revised upward its 2002 GDP estimates from 2.9 to 3.1 percent with 3.77 percent in the third quarter and 3.48 percent in the fourth quarter.

The slower-than-expected economic recovery in the second half of the year was a result of anti-terrorism efforts in the west and successful terrorist attacks, the US's corporate scandals and lack of economic confidence, said the institute's president Mai Chao-cheng (麥朝成).

Presenting a rosier economic forecast, the government's Directorate General of Budget, Accounting and Statistics announced, in mid August, that Taiwan's GDP in the second quarter climbed to 3.98 percent, which was expected to surge to an estimated 4.06 percent in the third quarter and 3.34 percent in the fourth quarter.

Although the nation's exports and imports have greatly picked up in the second quarter, inbound investment, however, remained sluggish, Mai said.

Overall domestic investment was expected to decline by 1.71 percent this year -- "a stagnant status, so to speak, that will negatively impact the local economy," he said.

Mai however added that, compared to last year's 20.61-percent contraction in domestic investments, this year's inbound investment has greatly improved and the institute foresees a stable 4.65-percent growth in domestic investment next year.

Chou Zi (周濟), a researcher at the institute, pointed out that China and Hong Kong has gradually become the nation's major outbound investment destinations, with exports to these destinations growing 26.8 percent over the past nine months.

"The implementation of the `three links' is sure to help the nation's economic development," Chou commented.

Saying he is even more optimistic about Taiwan's economy, Jonathan Anderson, executive director of Goldman Sachs' Asia-Pacific Investment Research, yesterday said that the investment bank has predicted a 2003 economic growth of 4 percent for Taiwan.

Anderson, however, said that the nation's IT sector may continue to experience negative growth due to the decline of demand in the US. He said there won't be an upturn until the second quarter of next year.