Taiwan's economic recovery will last for years: analyst

Taiwan's economy has weathered the recent stagnation and has rebounded with considerable strength, economists said yesterday.

Economies in Taiwan and the rest of the world have all passed through difficult times but are steadily recovering, Wang Tu-fa (王塗發), an adviser to the private think tank Taiwan Institute of Economic Research (TIER, 台經院) said yesterday.

Economic recovery in the US -- the biggest economic powerhouse in the world -- is the engine driving the revival of the global economy, Wang said.

Wang said the expected economic resurgence is expected to continue for years, with 2004 a starting point, powered by the nation's presidential election in March.

TIER forecast the nation's economy, as measured by GDP, to grow 4.62 percent this year from 3.51 last year.

Hsu Sung-ken (許松根), a national policy adviser to President Chen Shui-bian (陳水扁), said that judging from various economic indexes, Taiwan's GDP is predicted to grow by 4 or 5 percent this year.

The overall economy will not only surge in Taiwan this year, it is even worried that fund and monetary activities may turn "too hot," Hsu noted.

EXPORT-ORIENTED

The Japanese economy, which has been flat for years, has begun to rekindle in recent months while the US economy is rebounding remarkably. Tai-wan, an export-oriented economy with Japan and the US being its major overseas markets, will most likely be included in the "bandwagon of growth," he said.

Goldman Sachs Group Inc has upgraded its forecast for Taiwan's economy to grow 5.8 percent from 5.0 percent for the year, the New York-based financial institute said last month.

But Goldman Sachs warned that going into the presidential election period, cross-strait tensions would rise again, as China is concerned that Taiwan would go further down the road to independence.

"Investors should brace for lingering political uncertainty," Goldman Sachs said.

"Politics aside, with the outlook for both externatl and domestic demand looking increasingly promising, the economy is set for an all-rounded upsurge in 2004," it said.

DOMESTIC DEMAND

Taiwan's government has increased its fiscal spending to strengthen domestic demand and to spur a pick up in domestic capital goods expenditure in the run up to the March election.

The newly proposed 10 New Major Construction Projects islandwide with an outlay of NT$500 billion over five years, plus the continuing influx of foreign funds to capitalize on Taiwan's stock and money markets are "adding wings to the tiger," Hsu said.

As exports continue to gain steam, Hsieh Chin-ho (謝金河), executive director of Wealth Magazine (財訊), said that 2004 is a promising year and he believes that the Taiwan Stock Exchange (TAIEX) will top 7,000 points sometime this year.

The TAIEX closed at 6,041 points Jan. 2.