Academia Sinica expects consumption, private investment to expand this year

Consumption investment in the private sector are both expected to expand throughout this year despite a slowing in overall economic growth, an Academia Sinica researcher forecast yesterday.

Private and investment are expected to expand by 3.26 percent and 17.47 percent, respectively, this year over last year's levels, thanks to the brisk domestic real estate market, which has gained momentum since late last year, and the improved unemployment situation, said Wu Chung-shu (吳中書), a researcher with Academia Sinica's Institute of Economics.

Noting Taiwan's economic performance for the first half of this year will not be as brilliant as previously predicted mainly as a result of high crude oil prices and the rapid appreciation of Taiwan's currency against the US dollar, Wu said that Taiwan's gross domestic product (GDP) will grow by 3.74 percent for this year, lower than the 4.05 percent figure that was previously predicted for the year.

Government one of the factors making up the GDP figure, totaled NT$372 billion (US$12 billion) this year, marking a paltry annual growth of 0.69 percent over the year-earlier level because many of the major development projects that the government had announced would be carried out nationwide have not begun yet, Wu said.

However, Wu noted, the booming real estate market and lower unemployment rate should jump-start consumption growth in the private sector.

Private meanwhile, should also pick up steam this year, hopefully up by 17.47 percent, to continue the dynamic rise from last year, when private investment posted a whopping annual growth of 28.2 percent, Wu added.

Meanwhile, Wu forecast, the nation's exports of goods and services will grow about 5.04 percent this year, down noticeably from last year's 15.27 percent as a result of the double pressures of a flagging world economy and an appreciating New Taiwan dollar against the greenback.

The annual growth of Taiwan's imports of goods and services are also seen to slow down this year, down from last year's 18.56 percent to 6.71 percent, Wu forecast.

The global economy has turned sluggish since the last quarter of last year mainly as a result of rising bank interest rates. At the same time, he said, crude oil prices have not declined to reflect the slowing economy, creating a further drag on economic growth.

Wu that this flagging trend will continue into the third quarter before things start to turn around. GDP growth is expected to hit 4.83 percent for the third quarter and 5.05 percent for the fourth quarter, for a growth of 3.74 percent for the whole of this year, he said.

How the nation's economy will fare in the following months will be directly impacted by several factors, including crude oil and raw materials' prices on the international markets; exchange rates among the greenback, the NT dollar and the Chinese yuan; the development of cross-strait relations and the fluctuation of bank interests rates at home and abroad, Wu said.