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Economic downturn has ended, government says

Analysts said yesterday that the economic downturn caused by the SARS outbreak is reversing after the infectious disease came under control late last month.

"The worst part is over," Chang Yaw-tzong (張耀宗), statistics director at the Ministry of Economic Affairs, said yesterday. "The economy will pick up its pace starting this month."

The global economy started to revive after the US-led war against Iraq ended in late April, which spurred on Taiwan's economy as orders from the US increased at that time, Chang said.

However, the slight rise was soon offset by declining overseas orders, especially from China and Hong Kong after SARS swept across the region.

Losses in the export industry are expected to amount to around US$1.34 billion in the second quarter of the year compared with the previous quarter, according to a ministry survey released late last week.

Orders from China and Hong Kong dived by 49 percent, or US$658 million, and orders from the US also saw a 20.1 percent drop, or US$270 million decrease from the first quarter, the survey said.

The poll, conducted from May 19 to 23, questioned 2,515 manufacturers with 1,048 valid responses.

In addition to a large scale reduction in foreign trade, a drop in domestic commercial activities and consumption forced the nation's Directorate General of Budget, Accounting and Statistics to cut its economic growth prediction for the year, from 3.68 percent to 2.89 percent, in the middle of last month.

As the threat of SARS diminishes, growth may bounce back.

"Business opportunities brought by post-war reconstruction in Iraq will soon have the effect of driving up the economy," Chang said.

Business leaders are also optimistic about the post-SARS economy.

"Although no concrete statistics indicate a boom in the export sector at this point, our members are preparing for vibrant business in the next half-year," said Hsieh Mei-ling (謝美玲), business director at the Importers and Exporters Association of Taipei (台北市進出口公會).

Many trading companies have been eagerly participating in various events designed to promote business opportunities, such as international exhibitions after the travel advisory against Taiwan is lifted by the World Health Organization, Hsieh said.

A research fellow, however, said any celebration should be tinged with caution.

"Before any improvement in foreign orders can be seen, deflation triggered by a reduction in domestic spending should be eased," said Chen Miao (陳淼), a researcher at the Taiwan Institute of Economic Research (台經院).

Revenues in wholesale, retail and restaurant sectors are expected to fall by 24.7 percent, or NT$55.5 billion, in the second quarter compared to the first quarter this year, the ministry poll showed.

"Reconstructing consumer confidence to thwart deflation should be made a priority to prompt the economy," Chen suggested.
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