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Local economy continues solid growth

The nation's economy expanded at a faster-than-expected pace in the second quarter, boosted by brisk exports and strong private investment. But the growth rate could slow in the second half of the year as uncertainty looms, a government official said yesterday.

A recent surge in oil prices, China's measures to curb its overheating economy, along with possible interest rate hikes, are expected to cloud economic prospects for the second half of the year, Hsu Jan-yau (許璋瑤), Minister of the Directorate General of Budget, Accounting and Statistics (DGBAS), told a press conference yesterday.

"These factors have mad it increasingly difficult to formulate a projection," Hsu said. "Now, we're cautiously guarded about the outlook."

The gross domestic product (GDP) climbed 7.67 percent in the April-June quarter from a year earlier, the DGBAS said.

The nation's GDP slumped 0.2 percent in the second quarter of last year when the SARS epidemic created a drag on domestic consumption.

The quarterly growth figure beat the DGBAS' previous estimate of 6.77 percent for the second quarter.

"Export demand for the nation's electronics products in the quarter exceeded our expectations," Hsu said.

Exports, which account for almost half of Taiwan's economy, grew 25 percent year-on-year in the second quarter, while private investment grew 35 percent faster than a year ago, DGBAS statistics showed.

In the first six months, the GDP grew 7.17 percent versus a 3.31-percent rise in the first half of 2003.

But the pace is expected to slow in the next two quarters with the GDP at 5.3 percent in the third quarter and 4.09 percent in the fourth, according to the DGBAS.

As a result, the directorate raised the full year GDP forecast to 5.87 percent, the strongest since 1998, from its previous estimate of 5.41 percent in May.

Taiwan's economy is expected to enjoy moderate growth of 4.49 percent next year, with the consumer price index (CPI) rising by 1.58 percent.

The CPI, a major indicator to gauge the inflation risk, rose 1.19 percent in the second quarter, reaching 1.49 percent at an annual rate for the year because of high oil prices, according to the DGBAS.

"Oil prices have caught our attention," Hsu said.

When asked whether the government's proposed hikes in electricity rates will weigh on consumer prices, Hsu said the impact would be limited.

A 10-percent increase in electricity will push the CPI 0.39 percent higher, he said.

Hsu concluded that "the likelihood for high inflation and weaker GDP growth is slim."
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