Sat, Oct 21, 2006 - Page 12 News List

Recovery in private consumption to lift economy: institute

By Amber Chung  /  STAFF REPORTER

Private consumption is expected to pick up in the current quarter on the back of a recovering stock market and falling oil prices, which have capped commodity price hikes, the Chung-Hua Institute of Economic Research (中經院) said yesterday.

Private consumption in the current quarter is expected to rise 2.64 percent from a year earlier and from the last quarter's 1.94 percent, marking the highest quarterly growth this year, according to the institute's latest forecasts released yesterday.

"The pickup is being driven by factors that contribute to individual wealth accumulation, including a recovering stock market, rise in average wages and declining raw materials prices,which have helped lower lower inflation in recent months," Peng Su-ling (彭素玲), a researcher at the institute, said at a press conference yesterday.

The institute projected that the nation would post a GDP growth rate of 3.01 percent in the fourth quarter, down from an estimated 4.03 percent in the third, due to a high comparable base last year.

For the full year, the institute retained its GDP growth forecast of 4.11 percent made in July, up marginally from 4.09 percent last year.

However, the institute made some changes to its GDP growth composition, including lowering its private consumption growth forecast to 2 percent from 2.27 percent because of weak performance in the first half, and trimming its import growth projection to 7.47 percent from 7.58 percent.

The biggest cut was made in domestic investment, which it now expects to drop by 0.95 percent instead of rising 2.14 percent, because of slow domestic demand and weakening investment conditions due to the nation's declining competitiveness, the researcher said.

With global demand for high-tech products looking strong, the institute raised its export growth forecast to 10.72 percent from 9.6 percent.

On the inflation front, the institute slashed its consumer price index (CPI) growth forecast to 1.02 percent from 2.19 percent amid declining crude oil prices and relatively low damages from typhoons and other natural disasters.

Looking ahead, GDP growth should remain steady at 4.1 percent next year, supported by continued growth of 2.48 percent in private consumption as the consumer bad-debt storm eased off, the institute said.

Domestic investment growth would rebound to 4.34 percent, while CPI would expand 1.69 percent next year, it said.

Export and import growth would slow, however, to 5.8 percent and 4.56 percent, respect-ively, affected by the economic slowdown in major trade partners like the US and China, the institute said.

“Taiwan will face more challenges than other Asian countries [in light of a

slowing global economy] for lack of a big domestic market and demand,” said

Sophia Cheng (程淑芬), president of Merrill Lynch Taiwan Ltd.

Cheng called for a stable policy environment to attract foreign investors,

hoping the government “would not let politics affect policies” in the face

of upcoming elections this and next year.

“Taiwan is a market of value where foreign investors would invest,” Cheng

said, “but Taiwan needs to offer a long-term and sustainable growth for

international investors willing to park their funds for long without

worries.”

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