As the new year draws closer, Taiwan’s economic picture is looking worse than predicted with increasingly pessimistic GDP growth forecasts unveiled by research institutes at home and overseas owing to the swift change of the global economic landscape and poor visibility.
While economists differ on the strength and magnitude of the global financial crisis, they generally agree it is the worst since World War II and is hurting the nation’s export-dependent economy more seriously than expected.
GDP growth forecasts for Taiwan next year vary from 4.12 percent by the Taiwan Institute of Economic Research (TIER, 台經院) to minus 3 percent from Goldman Sachs.
Optimists like TIER, which released its prediction on Nov. 6, believed increased government investment and better ties with China could expand domestic demand and offset declining exports amid the global downturn.
Pessimists like the Economist Intelligence Unit (EIU), the research arm of The Economist, said on Friday the spate of stimulus plans were inadequate to neutralize the slump in exports that account for more than two-thirds of Taiwan’s GDP.
Liang Kuo-yuan (梁國源), president of Polaris Research Institute (寶華綜合經濟研究院), said he surveyed many businesses and virtually all complained about the blow of the financial crisis.
“Many share the view that it is the worst nightmare they have seen in decades,” Liang said by telephone. “And some wonder if they can survive the crisis.”
Liang, whose organization is due to disclose its forecast on Wednesday, said it was overly upbeat for the government to predict a slow beginning of recovery in the second quarter of next year when the US would most likely remain in recession till the end of it.
Liang said there was a consensus among researchers the US economy has to recover before Taiwan can put up solid momentum on grounds the US represents most of the end-market for Taiwanese high-tech products.
“It is more realistic to expect a reverse in the second half when the impact of public works plans may start to be felt,” Liang said.
Cheng Cheng-mount (鄭貞茂), chief economist at Citigroup Inc in Taiwan, whose company put Taiwan’s GDP forecast for next year at 1.5 percent on Tuesday, said he may have to make a revision next year.
Cheng said the question he had been asked most frequently these days was when the crisis would hit bottom, and he had to admit he did not know for sure.
“I can only say the storm will not repeat the Big Crash of the 1930’s when US unemployment hit 25 percent but is pulling the world economy down to the worst state since Word War II,” Cheng said.
The Chung-Hua Institution for Economic Research (CIER, 中經院) echoed the uncertainty with Wang Lee-rong (王儷容), director of the institute’s Center for Economic Forecasting, noting the later the figure is published, the gloomier the projection seems to be.
Wang attributed the bearish sentiment to the rapid deterioration of the economy around the world. CIER recently lowered its forecast for the nation to 1.24 percent next year and speculated on a modest recovery beginning in the third quarter.
Academia Sinica, the country’s top research institute, which unveiled its forecast on Friday, put the figure at 0.56 percent. Wu Chung-shu (吳中書), a research fellow at the institute, painted the goal as an uphill struggle whose success hinges on effective execution of the stimulus package.