Tue, Dec 28, 2004 - Page 10 News List

Economic growth to slow in 2005

RESEARCH FORECAST TIER predicts the economy will grow at around 4.62 percent next year, amid rising interest rates and China's measures to cool its economy

By Jessie Ho  /  STAFF REPORTER

The nation's economic growth will dive slightly next year, dragged down by the cooling world economy, fluctuating oil prices, rising interest rates and China's economic clampdown, the Taiwan Institute of Economic Research (TIER, 台經院) said yesterday.

The research institution predicts that the whole-year economic growth rate for next year will be around 4.62 percent, down from 5.93 percent for this year, which TIER said to be the nation's best performance since the Asian financial crisis in 1998.

TIER's GDP forecast for next year is higher than the Directorate General of Budget, Accounting and Statistics' 4.36 percent as well as Chung-Hua Institution for Economic Research's (中經院) 4.37 percent. Chung-Hua Institution for Economic Research is another private think tank.

"Regardless of the downturn, Taiwan's economic outlook will still maintain a fairly bright level, bolstered by robust exports and investment," TIER President Wu Rong-i (吳榮義) told reporters yesterday.

For the first 11 months of the year, local exporters secured US$195.29 billion of orders, a 26.56 percent increase from the same period last year, backed by demand for electronics and information-technology products, according to statistics from the Ministry of Economic Affairs.

One major boost for the nation's economy will be the "10 New Major Construction Projects," into which the government plans to pump NT$93.09 billion starting next year.

The construction of infrastructure is expected to create more jobs, according to the institute.

Large-scale construction projects in the private sector are also set to be launched, such as the high-speed railway, some 12-inch wafer factories, as well as some thin-film-transistor liquid-crystal-display (TFT-LCD) plants, which will further press the jobless rate to a new low, Wu said.

The unemployment rate stood at 4.14 percent last month, the lowest since May 2001.

Local manufacturers also hold an optimistic view.

According to the institute, 20.2 percent of polled manufacturers believe the economy will advance, up from 11.7 percent in the poll conducted last month. Those who have a more pessimistic outlook fell from 22.6 percent to 18.5 percent. Others think the economy will remain at the current level.

While the US Federal Reserve has raised interest rates for the fifth time this year, Taiwan's central bank appears to have no urgency to follow suit this year, Wu said, citing the recent stabilization of oil prices, which have thus eased inflation.

If the central bank did raise rates, it might upset the property market, which has seen significant expansion this year, Wu said.

However, there are still uncertainties ahead.

Despite the completion of the legislative elections, political uncertainty, especially a possible Cabinet reshuffle in February, will weigh on economic growth, according to Wu.

"The two political parties should cease political confrontation and push through major bills that would boost the economy, such as amendments to the Resolution Trust Committee Fund Regulatory Provisions (金融重建基金設置及管理條例)," he said.

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