If China continues to macro-manage its economy and the global economy keeps slowing down, Taiwan's economic growth in the second half of this year is expected to be adjusted downward, economists said yesterday.
The Chung-Hua Institution for Economic Research (
Foreign banks in Taiwan have set their forecasts of Taiwan's economic growth this year at between 4.0 percent and 4.5 percent.
On Taiwan's economy, Cheng Chen-mao (鄭貞茂), an economist at Citibank, said that second-quarter growth may be even lower than the first quarter, though many have predicted it will improve in the second half. Two factors must be taken into account for this, Cheng said: To what extent China macro-manages its economy, and how strongly the US economy recovers.
A third factor affecting Taiwan's Q3 and Q4 performance will be how strongly Taiwan's electronics industry recovers, Cheng added.
Trade surplus
He said Taiwan's foreign trade surplus has shrunk mainly because its electronics industry has not recovered, keeping a large portion of production facilities idle. Therefore, he said, increases in orders for and prices of electronics products will be a key indicator for economic performance in the second half of the year.
China has been an important market for Taiwan, absorbing Taiwan's electronics output in step with the world market. Over the past few years, however, Taiwan has increased steel, petrochemical and other exports to China. If China keeps implementing its macro-management policy, Taiwan's export businesses will definitely be affected, Cheng said.
Citibank has forecast that China's economy will grow 8.5 percent this year, but the Chinese government recently announced that the growth rate for the first quarter was 9.5 percent. Therefore, Cheng said, China will likely take further steps to cool down its economy.
An economist with Taiwan's Standard Chartered, Tai Hui, agreed that the Chinese and US economic situations will affect Taiwan's performance in the second half of this year.
As the two major economies are doing quite well, as is Taiwan's domestic demand, and the government is seeking to boost the economy, Standard Chartered Taiwan remains optimistic about the nations' growth in the second half, Hui said.
Hui attributed the poor first-quarter trade surplus -- a mere US$290 million -- to slow export growth in semiconductors and rising oil prices.
Domestic market
At the same time, he pointed out, strong domestic demand and real-estate investments have been buttressing Taiwan's economic development.
He warned that oil price fluctuations and the nation's growing dependence on the Chinese market are "risk factors" that Taiwan must face.
Professor Chu Hao-min (
"If not for the Chinese market, Taiwan would have long ago suffered a trade deficit," Chu said.
He further said that Taiwan's current account surplus has been shrinking, capital outflows have exceeded inflows, and the international balance of payments is feared to worsen.
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