Growth forecast slashed to 3.63%

The government yesterday cut the nation's economic growth forecast for the year to 3.63 percent from the previous prediction of 4.21 percent, citing sluggish exports amid a weakening global economy.

The downward revision is the second time the Directorate General of Budget, Accounting and Statistics (DGBAS) has adjusted the GDP growth forecast this year. In February, the agency cut this year's economic forecast to 4.21 percent from 4.56 percent.

The DGBAS yesterday also reported the economy grew only 2.54 percent in the first three months through March, making it the worst performance since a 0.12 percent contraction in the second quarter of 2003 amid the impact from SARS. In February, the agency predicted a 4.03 percent expansion for first-quarter GDP.

Moreover, the agency's full-year economic forecast is the lowest among others made by research institutions. Last month, the Taiwan Institute of Economic Research (台經院) said GDP growth this year would be 4.41 percent. Both the Chung-Hua Institution for Economic Research (中經院) and Academia Sinica's forecast put the figure at 4.05 percent.

As the growth momentum of the global economy slows along with the continued migration of industry overseas, the DGBAS predicts that exports will grow by 2.2 percent on items, down from 15.3 percent last year; and imports will rise by 1.2 percent, down from 18.6 percent a year ago. With unemployment in decline, private consumption is expected to rise by 3 percent, the DGBAS statement said, adding that domestic investment will increase by 8.5 percent, bolstered by several major projects such as the establishment of the forth stage of a naphtha cracker facility, the high-speed railway and expansion of thin-film-transistor (TFT) liquid-crystal-display (LCD) plants.

Taiwan's jobless rate stood at 4.15 percent in March, a drop of 0.13 percentage points from the previous month. Private investment, along with government spending such as the 10 New Major Construction Projects, is expected to drive up domestic demand by 3.2 percent, which contributes 2.87 percent to GDP growth for the year, according to the statement.

The consumer price index remained stable and will rise by 1.7 percent through the year, the DGBAS predicted. Although the wholesale price index was driven up by rising raw material prices, the range is compensated by the appreciating NT dollar and will only advance by 1 percent, the DGBAS statement said.

The 0.38 percent downward adjustment in GDP growth makes it harder for the government to achieve its goal of 4.5 percent growth in GDP.

Premier Frank Hsieh (謝長廷) said last week that the Cabinet plans to boost the economy with several measures, including extending an existing NT$300 billion subsidized home-loans program, and accelerating spending allowed by a NT$500 billion five-year special infrastructure budget passed by the legislature last year.