Fri, Dec 31, 2004 - Page 10 News List

Academia Sinica expects 4.05 percent growth next year

FORECAST The impact of rising oil and raw materials prices will persist into next year, but should be offset by rising domestic spending and private investment

By Jessie Ho  /  STAFF REPORTER

Despite being affected by the weakening world economy, Taiwan's economy is expected to maintain 4.05 percent growth next year, supported by private investment, the Academia Sinica predicted yesterday.

The nation's economic growth, measured by GDP, is expected to reach 5.99 percent this year, despite surging oil and raw materials prices, rising interest rates and the US' weak dollar policy, said Wu Chung-shu (吳中書), a research fellow at Academia Sinica.

The impact of this is expected to persist through next year, but, "fortunately, domestic spending and investment will still grow, although at a slower pace, to help sustain economic growth," Wu said.

Minister of Economic Affairs Ho Mei-yueh (何美玥) said on Wednesday that the ministry is targeting 5 percent growth next year. This is higher than the Directorate General of Budget, Accounting and Statistics' forecast of 4.36 percent, which it made last month.

Academia Sinica predicts private investment may increase by 7.86 percent next year, with domestic spending to grow 2.51 percent, falling from this year's 25.82 percent and 2.96 percent, respectively.

Unstable cross-strait relations will remain a major hurdle to future economic development, after Beijing's recent decision to enact anti-secession legislation, according to the Academia Sinica.

"Foreign investors usually place their medium and long-term investments here based on cross-strait prospects," Wu said.

"The worse the [cross-strait] situation is, the lower that their investments will be," Wu said.

The effect of China's macro-economic control policy is another variable for Taiwan's economy, Wu said.

Should China further move to tighten its economic expansion, Taiwan's exports to the country may decrease as demand falls, but that negative impact will be offset by falling raw materials prices, he added.

Still, exporters need to be cautious on the appreciation of New Taiwan dollar, which Wu said may rise further against the US dollar next year.

The nation's exports are expected to grow 8.8 percent to NT$7.55 trillion (about US$236 billion) next year, after marking an increase of 17.49 percent this year to NT$6.94 trillion, the institute predicted.

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