Tue, Aug 05, 2008 page12

• ANALYSIS: Academics doubtful on government plan to boost economy

  PUBLIC WORKS Experts said public investment would not be enough to offset the fall in foreign trade and boost Taiwan’s export-oriented economy

  • By Crystal Hsu / STAFF REPORTER
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  The government is seeking to pull the nation out of economic gloom by increasing spending on public construction projects next year, but academics expressed doubt yesterday that the efforts would be adequate to counter the global slowdown that is hurting foreign trade.

  The Cabinet will brief President Ma Ying-jeou (馬英九) on Thursday on its 2009 fiscal budget proposal, projected at NT$1.83 trillion (US$59.68 billion), up 6.9 percent from this fiscal year.
  
  

  The funding earmarked for economic development is forecast to surge 20 percent, topping all other outlays, with NT$210 billion to be spent on public works, the Council for Economic Planning and Development said.
  
  

  The council said the government’s economic strategy would focus on stimulating growth and stabilizing consumer prices to cope with inflation and other challenges at home and abroad.
  
  

  Norman Yin (殷乃平), a professor at National Chengchi University’s Money and Banking Department, said that by boosting public spending, the government would expand domestic demand and raise the GDP, but it would not boost foreign trade — the mainstay of the nation’s exported-oriented economy.
  
  

  Official statistics showed that export orders rose 9.3 percent year-on-year to US$31.36 billion in June, the lowest growth since March last year, because of decelerating growth in electronics and precision equipment sales.
  
  

  “The spending plan will not be able to offset falling demand from the US and other trade partners,” Yin said by telephone.
  
  

  The bulk of the construction budget, 53.3 percent, will be used to carry out Ma’s campaign pledge to turn Taiwan into “an intelligent country.” About NT$45.9 billion is earmarked for transportation infrastructure and NT$18.2 billion will be spent on flood control projects.
  
  

  The council said the expenditure could create 180,000 jobs and raise GDP growth by 1.68 percent next year.
  
  

  Daw Jaw-yang (戴肇洋), a researcher at the Taiwan Research Institute (台綜院), said it would be an uphill struggle for the government to fight inflation caused by rising fuel and raw material costs.
  
  

  “The government is poorly equipped in the battle against imported inflation as the country has no control over global oil or food prices,” Daw said.
  
  

  As long as crude and raw material prices remain volatile, any optimism may prove premature, Daw said, adding that several economic research bodies had already trimmed their GDP growth forecasts for this year.
  
  

  Last week, the Taiwan Institute of Economic Research (台經院) cut its GDP growth forecast to 4.27 percent from its April prediction of 4.3 percent on concerns of lower consumer spending. Ten days earlier, the Chung-Hua Institution for Economic Research (中經院) trimmed its forecast from 4.76 percent to 4.5 percent.
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