Sat, Sep 24, 2005 - Page 10 News List

Economy picking up on expected year-end demand

By Jessie Ho  /  STAFF REPORTER

The economy is picking up after bottoming out in the first half of the year, driven by strong overseas demand in the coming traditional peak season, but the surging oil prices are likely to continue weighing on the nation's consumer prices, according to a report released by the Taiwan Institute of Economic Research (TIER, 台經院) yesterday.

The nation's consumer prices for the first eight months were 2.13 percent higher than the same period last year, but the figure may go up further due to rising crude oil prices, which may trigger inflation, TIER researcher Chen Miao (陳淼) said yesterday.

To ease the concern, Premier Frank Hsieh (謝長廷) demanded that state-run Chinese Petroleum Corp (CPC, 中油), which supplies 70 percent of the gasoline in Taiwan, keep its fuel prices at their current levels for the rest of the year.

"I think the government should let market mechanisms determine the prices, instead of intervening," said David Hong (洪德生), acting president of the TIER.

If CPC shows a deficit for this year, the government would likely allocate some money to help the company maintain its operations, Hong said.

"This would be no more than a redistribution of costs, making all taxpayers share in CPC's loss, which is not a good solution in the long term," Hong said.

Local manufacturers were upbeat about the economic outlook in the next quarter, pushing the leading industry index to 110.8 points last month from 103.12 in July, according a poll conducted by TIER.

As for the foreign-exchange market, the New Taiwan dollar has risen by 0.61 percent against its US counterpart this year, which created a disadvantage for the export-dependent economy, Chen said.

With the nation's trade surplus having shrunk significantly, the NT dollar is likely to stay at its current level or depreciate, Chen said.

For the first eight months of the year, Taiwan reported a trade surplus of US$1.17 billion, down 79.1 percent from a year earlier, according to government statistics.

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