Planners calculate the impact of war on local economy

With few export trade links to the Middle East, the US-led attack on Iraq is not expected to have a big impact on Taiwan's foreign trade this year as long as the conflict lasts no longer than six weeks, the Board of Foreign Trade said yesterday.

Exports to the Middle East, which comprise 16 countries, including Saudi Arabia, Kuwait and UAE, totaled US$2.38 billion last year, up 7.19 percent from a year earlier, accounting for 1.8 percent of Taiwan's total exports, the board said in a report.

Imports from the Middle East, mainly crude oil from Saudi Arabia, amounted to US$7.25 billion last year, up 9.83 percent and accounting for 6.4 percent of total imports, it said.

The board forecast that the impact in trade would be limited because OPEC members such as Saudi Arabia have committed to making up for any shortage of oil supplies caused by events in Iraq.

But if the war with Iraq drags on, rising oil prices are likely to adversely affects economies worldwide, including Taiwan, the board said.

Wei Duan (韋端), director of the Taiwan Research Institute (台綜院), said he doesn't think the US will want to get involved in a prolonged incursion against Iraq.

"But if the war ends quickly, Taiwanese manufacturers may benefit from a global economic recovery," Wei said, citing local exporters of medical goods, plastics, chemicals and petrochemical products as possible winners.

The war may also trigger higher prices for petrochemical products. A 5-percent hike in oil prices could lower Taiwan's exports by as much as NT$4.9 billion and cause a reduction of NT$6.5 billion in GDP, the Taiwan Institute of Economic Research (台經院) said yesterday.

The Cabinet-level Council for Economic Planning and Development forecast that Taiwan's GDP this year may fall by 0.07 percentage points to 3.45 percent if the war lasts between three and six months. The council earlier forecast 3.52 percent growth for this year.