The global economic upswing is expected to continue next year, albeit at a slower pace as rising oil prices and less market stimulus cut into the strong momentum built up in the second half of last year and the first quarter of this year, an economist said yesterday.
"After a strong bounce worldwide over the past year, growth slowed somewhat in the second quarter but we expect the rosy picture to continue in 2005," John Calverley, chief economist and strategist with American Express Bank, told reporters in Taipei yesterday.
Calverley's short visit to Taiwan was part of a whirlwind Asian tour that will take him to several capitals, with Taipei being the second stop, to share his views on the world economic outlook.
Looking back at the past 15 months, Calverley said China's investment boom, reduced uncertainty in Iraq and strong consumer spending on the back of low borrowing rates and rising house prices have helped global growth to soar.
However, the pace of growth is expected to slow through next year even if "the world economy remains in a healthy state in many respects," he said.
The tight supply/demand balance of crude oil, fueled by China's rapid growth in demand, has pushed oil prices over US$50 a barrel from US$25-30 last year.
"The rise is estimated to cut world GDP growth by about 1 percent in 2004 and 2005," Calverley said.
Furthermore, expected higher interest rates, higher mortgage rates that will reduce household refinancing, slowing corporate investment growth and China's efforts to put the clamps on an overheating economy are all contributing to what will likely be slower growth next year, Calverley said.
For Taiwan's part, many indicators have shown that the economy will follow the global trend and experience lower yet rosy growth in the coming year.
"We forecast that Taiwan's economic growth will edge down to 4.8 percent next year from this year's estimated figure of 5.8 percent," Calverley said.
Still, the figure is much higher than last year's 3.2 percent and the record low of minus 2.18 percent in 2001, according to figures from the Directorate General of Budget, Accounting and Statistics.
Calverley's forecast echoed a monthly report released by the Taiwan Institute of Economic Research yesterday, which suggested manufacturers will become more cautious over the next six months as economic expansion slows both at home and abroad.
The institute's September survey showed that 36.8 percent of polled companies -- down from August's 43.7 percent -- are expecting better economic signs between now and March.
Those with a bearish point of view on economic conditions rose from 13.6 percent in August to 20.6 percent last month, while 42.6 percent believed the economic climate will remain unchanged, a slight decrease from 42.7 percent the previous month.
Although global expansion has decelerated in the second quarter, the institute said that Taiwan's economic recovery will continue in a stable manner this year, which might result in the best performance in eight years.
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