The economy is likely to underperform most Asian countries this year, which could put it at the same level as the worst hit economies of Thailand, Indonesia and the Philippines, Credit Suisse economist Tao Dong (陶冬) said.
Despite high hopes that the launch of direct shipping links across the Taiwan Strait last month could help lead Taiwan out of the economic downturn, the Hong-Kong based Credit Suisse Group economist said he was not optimistic about the nation’s economic performance this year, the Chinese-language Commercial Times reported yesterday.
“There is a structural problem in the Taiwanese economy and the biggest risk facing Taiwan is a significant lack of domestic demand,” Tao was quoted as saying in the report.
Tao said that new jobs created by domestic businesses were on the decline as the nation’s export growth, the mainstay of the economy, has been badly battered by the global economic crisis.
Compared with other Asian countries, Tao said his outlook for the economy this year was relatively pessimistic.
Tao said the Taiwanese government’s efforts to spur domestic demand were not enough. For example, the issuance of NT$3,600 (US$110) consumer vouchers on Jan. 18 was a very small amount of money and would do little to improve domestic demand, he said.
“The [Taiwanese] government needs to give the public the confidence to spend, otherwise people will still seek ways to deposit money into their accounts once they receive their vouchers,” Tao said, adding that the main problem facing Taiwan was the lack of consumer confidence, not lack of money.
Tao said that the “hollowing out” of Taiwanese industries, which refers to the shift of manufacturing to other countries, had become very prominent over the past 10 years and was hurting the nation’s business competitiveness. He urged the Taiwanese government to do whatever it could to reverse the trend.
On the economic benefits created by the launch of direct transport, trade and postal links between Taiwan and China — dubbed the “big three links” — Tao said the direct links would help lower Taiwanese companies’ operating costs, but would make a limited contribution to help shore up the economy as a whole, unless there was a significant improvement in cross-strait political relations.
The latest forecast by the Bureau of Foreign Trade under the Ministry of Economic Affairs showed that the values for Taiwan’s exported and imported products would decline by 1.35 percent and 4.2 percent respectively this year.
But the nation’s trade surplus was expected to grow to US$21.75 billion this year, from US$14.84 billion last year, the Central News Agency reported yesterday.
In the latest issue of Taiwan’s Foreign Trade Forecast Quarterly, compiled by Chung-Hua Institute for Economic Research, economists forecast that the nation’s economy could grow 2 percent this year if the global economy rebounds to 0.2 percent growth, while the New Taiwan dollar would trade at an average NT$32.6 against the greenback.
Under the backdrop, the nation’s exports may contract 1.35 percent to US$260.84 billion this year while imports could contract 4.2 percent to US$239.089 billion — or a surplus of US$21.751 billion, the think tank’s forecast said.