The government should improve the investment environment and boost private consumption, or its goal of sustaining economic growth at 4 percent this year is very likely to fail, an economic researcher said yesterday.
"The weak private sector makes it difficult to reach the 4 percent target," David Hong (洪德生), president of the Taiwan Institute of Economic Research (TIER, 台經院), said at a press briefing yesterday.
In the absence of large-scale projects, private investment is expected to increase by just 2.72 percent this year, according to a report released by the institute yesterday. Private consumption, battered by the credit abuse storm, rising consumer prices and interest rates, and the tightening of credit by banks, would grow by only 2.31 percent, said Chen Miao (陳淼), a research fellow at the TIER.
Regardless of the fragile private sector, strong demand from steady economic expansion in the US, Japan and Europe over the second half of the year would lift the export sector, Chen said.
The nation's trade surplus reached US$7.75 billion for the first half of the year, an 87.2 percent jump from a year ago, according to government statistics. TIER predicted the full-year trade surplus would hit US$19.6 billion, up from US$15.81 billion last year.
Robust trade and exports prompted TIER to raise its economic growth forecast for the year to 3.95 percent, up from the 3.91 percent prediction it made in April, when the research institute revised down GDP growth from January's figure of 4.02 percent.
The figure is the lowest of all the research institutions. The government's statistics bureau predicted GDP to hit 4.31 percent this year, while Academia Sinica forecast the figure to reach 4.12 percent, and the Chung-hua Institution for Economic Research's (中經院) estimate was 4.11 percent.
But local manufacturers were more conservative about their business for the coming six months, causing the manufacturing climate index to slide for the third consecutive month to 99.82 points from 100.49 points in May, the institute's latest survey showed yesterday.
According to a survey, just 37.4 percent of manufacturers said they were positive about the economy for the coming six months, down from 42.1 percent in the last poll, while 19.4 percent of those polled said they were pessimistic about the economy, up from 17.1 percent.
The major factor for the cautious outlook toward the traditional peak season was surging prices of raw materials, particularly oil and metal, Chen said.
Slowdown
The TIER's survey results coincide with a Taiwan Business Indicators report released by the Cabinet-level Council for Economic Planning and Development, which said the indicators displayed signals of a slowdown of the economy.
The leading index decreased 0.2 percent to 110.2 points, and the coincident index also fell 1.2 percent to 111.7 points from the previous month, according to the report released yesterday.
In addition, the monitoring indicators last month fell by 3 points to 21, flashing a "yellow-blue" light that signals a deceleration in major economic activities after 10 successive months of receiving a "green" light, the council said in the report.
In a survey of local manufacturers conducted by the council, 16 percent of the polled expected the economy to improve over the next three months, down from 18 percent a month earlier, while 14 percent held a negative view, up from 13 percent a month earlier.
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