Sat, Feb 05, 2005 - Page 11 News List

Growth to hit 5 percent, top economist predicts

STAFF WRITER, WITH BLOOMBERG

Hu Sheng-cheng, chairman of the Cabinet-level Council for Economic Planning and Development.

PHOTO: GEORGE TSORNG, TAIPEI TIMES

The nation's economy will grow at least 5 percent this year, bolstered by two major investments and private participation in state infrastructure projects, a top economic planner said in a recent interview.

Formosa Plastics Corp (台塑) and Chinese Petroleum Corp (中油) are separately investing a total of NT$500 billion (US$16 billion), said Hu Sheng-cheng (胡勝正), chairman of the Council for Economic Planning and Development.

Chinese Petroleum said on Jan. 4 that it will sign an agreement this month with 12 partners to invest in a NT$370 billion project to increase production of fuels and chemicals, while Formosa Heavy Industries Corp (台塑重工) has reportedly applied to the Industrial Development Bureau for permission to build a NT$130 billion steel mill in Yunlin County.

The government has also promoted private participation in its infrastructure plans, luring an additional NT$130 billion, Hu said.

"All together, it will help sustain GDP growth of at least 5 percent this year and perhaps next," he said.

Analysts say falling demand for the nation's electronics parts and computer chips, which make up the biggest share of exports, may cast that target in doubt.

"We are seeing slowing growth in both exports and private consumption," said Michael Ding (丁予嘉), chief economist of Fubon Financial Holding Co (富邦金控) and president of Fubon Securities Investment Co (富邦投信) in Taipei.

Last year, exports increased 20.7 percent to US$174 billion from a year earlier, but the government predicts the growth growth will level out this year with a rate of 7.4 percent.

Academia Sinica predicted early last month that Taiwan's exports may grow at a slower pace of 8.8 percent this year to reach about US$236 billion.

The nation's economic growth in terms of GDP is expected to be 4.56 percent, down from 5.93 percent last year, according to a prediction from the Cabinet-level Directorate General of Budget, Accounting and Statistics in November.

Forecasts are lower at research institutes such as the Taiwan Institute of Economic Research (TIER, 台經院), which forecast this year's GDP at 4.62 percent, and the Chung-Hua Institution for Economic Research (中經院), which predicts 4.37 percent. Academia Sinica, the nation's leading research institute, forecast 4.05 percent growth.

Fubon Financial's Ding forecasts an economic expansion of just 3 percent this year.

Hu, 64, was previously a professor of economics at Purdue University from 1968 to 1996 in the US. He returned to Taiwan to work for Academia Sinica in 1996 and then became a board member of the central bank. In 2000, he joined Chen Shui-bian's (陳水扁) administration as minister without portfolio and has headed the council since May last year.

During the interview, Hu said the government now plans to develop a third major industry in communications, in addition to semiconductor and flat-panel display manufacturing.

Under the "e-Taiwan" project, it will build communication infrastructure. Once completed, the project will provide a market for hardware producers, he said.

Currently, the semiconductor and flat-panel display sectors are the nation's two key economic drivers, led by Taiwan Semiconductor Manufacturing Co (台積電), the world's largest supplier of made-to-order chips, and AU Optronics Corp (友達光電), the world's third-largest maker of flat-panel displays used in computers and televisions.

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