Sat, Dec 04, 2004 - Page 10 News List

Growth could still exceed expectations

HAZY FUTURE A weakening US dollar, rising oil prices and interest rate hikes paint a gloomy picture. But things may not be as bad as they seem, an economic institute says

By Joyce Huang  /  STAFF REPORTER

Despite the expected economic slowdown, there is still a possibility for the nation's economy to perform better than the estimated 4.37 percent next year, down from this year's projected 5.91 percent, the Chung-hua Institution of Economic Research (CIER, 中經院) reported yesterday.

"If non-economic trade barriers are removed to increase private investments and to beef up the nation's international competitiveness, economic growth [next year] may be rosier than expected," Chou Ji (周濟), director of the think-tank's Center for Economic Forecasting, said at a seminar.

Despite the New Taiwan dollar's rise against its US counterpart in recent months, economic growth may hit 5.38 percent this year -- if a "J curve" effect occurs to increase the nation's exports, Chou said.

The "J curve" refers to the chance that the price of exports compared to imports will eventually induce an expansion of exports and a cut in imports, which, in turn, will improve the balance of payments.

Otherwise, the economy may contract to see a lower 3.82 percent growth if exports are negatively impacted by the local currency's expected appreciation, and growth as low as 2.61 percent if investment confidence also suffers, he added.

Chou noted that the nation's gross national product (GNP) per capita will for the first time break through the US$15,000 level to reach US$15,646 next year although a weakening US dollar is inevitable.

As for this year's GDP, the think tank shared a similar view with other research bodies and revised upward its forecast to 5.91 percent from the 5.35 percent projected in July based on the rosier performance in both imports and exports.

Profound impact

The local currency's appreciation against the US dollar has a profound impact on the economy, posing uncertainty over rising oil prices and interest-rate hikes, according to the think tank.

CIER estimated that the NT dollar may trade at an average NT$33.31 against its US counterpart by the end of this year, but will strengthen to an average NT$31.7 next year and NT$31.34 in 2006.

But Lee Kao-chao (李高朝), an advisor to the Council for Economic Planning and Development, yesterday downplayed the near-term impact of the local currency's appreciation on exports.

Compared to currencies of other Asian countries, the NT dollar has weakened to benefit the nation's exporters, Lee said. As a result, he predicted the nation's growth may increase to 4.5 to 5 percent next year.

Hsieh Chin-ho (謝金河), president of the Chinese-language business magazine Win-Win Weekly, is pessimistic, saying that a stronger NT dollar is expected to negatively push the nation's capital outflow to China, which has resisted calls to float its currency, the yuan.

Hsieh said that the central bank is caught in a dilemma. Intervening to prevent the NT dollar from appreciating too much by buying US dollars, would be tough on its coffers. But if no action is taken to curb the NT dollar's rise the local economy will be hurt, he added.

Hsien yesterday said that the economy may hit rock bottom in the second quarter next year as a result of declining demand for IT exports such as flat screens.

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