Wed, Nov 08, 2006 - Page 12 News List

S&P sees soft economic landing

REASONABLE GROWTH The global ratings agency projected moderate growth for the nation, adding that political scandals do not necessarily affect business sentiment

By Jackie Lin  /  STAFF REPORTER

Taiwan is expected to maintain a reasonable economic growth rate next year, although the slowdown in the US economy will affect Asian markets, which have become very reliant on exports to the US, according to Standard & Poor's Ratings Services yesterday.

The nation's exports to the US stood at US$27.19 billion during the first 10 months of the year, accounting for 14.7 percent of total exports, second only to exports to Hong Kong and China at US$73.29 billion, or 39.6 percent, government tallies showed yesterday.

"A slowdown in the US will hit the Asian economies, but not as much as what people think," said David Wyss, chief economist at Standard & Poor's, during a press briefing in Taipei.

If the US economic growth rate drops by about 1 percentage point, China might slow down by half a point, Wyss said.

Asked about the possible impacts of the recent political tension on the economy and investor confidence, Wyss said he could not comment on the issue without gaining a better understanding of the domestic situation.

A look at global economies would show that Taiwan is not alone in suffering from political scandals, which might not necessarily affect industrial and business sentiment, the New York-based economist added.

On the currency front, Wyss forecast that the greenback would depreciate by 5 percent to 10 percent by the end of next year. If the US dollar goes down by 10 percent against the euro, the NT dollar is expected to appreciate by about 5 percent, he said.

Last week the NT dollar recorded its biggest weekly gain of 1.1 percent in six months, closing at NT$32.92 against the US dollar on Friday as better-than-expected earnings from companies including Hon Hai Precision Industry Co (鴻海精密) drew overseas investors to domestic stocks.

The local currency continued its climb against the US dollar on the Taipei Foreign Exchange yesterday, rising NT$0.11 to close at NT$32.84 on turnover of US$1.013 billion.

Lehman Brothers also issued an economic report yesterday, echoing Standard & Poor's view on the nation's slowing export growth.

Lehman economist Rob Subbaraman forecast that exports were unlikely to rise at the same pace as before, as the growth in export orders decelerated sharply for four consecutive months -- from 26 percent year-on-year in May to 12 percent in September.

The slowing global economy, especially in the US and China, is starting to have a negative impact on Taiwan's exports, Subbaraman said in the report.

Lehman Brothers warned that the prolonged political uncertainty would hurt investment, while the sharp rise in household debt, coupled with rising rates, was constraining consumption.

It further predicted that the consumer price index (CPI), after dropping 1.19 percent last month for the third consecutive month would reverse up by about 1 percent by the end of the year, because of the disinflating forces of weak domestic demand, easing oil prices and fierce competition in the region, the report said.

This story has been viewed 2086 times.
TOP top