Sat, Apr 18, 2009 - Page 12 News List

Think tank trims GDP predictions

‘TOUGH YEAR’ The Chung-Hua Institution for Economic Research forecast was more pessimistic than the government’s, but rosier than Polaris’ 4.8 percent decline

By Crystal Hsu  /  STAFF REPORTER

A local think tank yesterday trimmed its forecast for the nation’s GDP growth, saying the economic contraction would worsen to 3.59 percent this year on slumping external demand and listless private consumption.

The Chung-Hua Institution for Economic Research (CIER, 中經院), which advises the government on major policy issues, predicted in December that the economy would grow by 1.24 percent, sustained primarily by government spending.

“It is a tough year,” Wang Lee-rong (王儷容), director of the institute’s Center for Economic Forecasting, told a media briefing. “It remains to be seen if the recent active stock trading does generate wealth [for investors] and help boost consumption.”

Wang said as the world has yet to recover from the financial crisis, the domestic downturn is not expected to reverse until the fourth quarter.

The decline in the US, the epicenter of the turmoil, is forecast to hit bottom in July, the academic said, citing IMF data.

Owing to the nation’s heavy dependence on exports, the economy will suffer deep losses, with GDP predicted to have contracted 9.12 percent in the first quarter, 6.61 percent, and 2.37 percent in the second and third quarters respectively, the CIER report showed.

Wang said conditions will show significant improvement in the final three months of this year, when GDP growth is estimated to recover to 4.12 percent, partly because of a low base last year.

“In the second half, the downshifts are expected to be mitigated and the government’s stimulus measures will start to impact the economy,” Wang said.

A week ago, the legislature gave the green light to the NT$149.1 billion (US$4.4 billion) special budget designed to strengthen infrastructure facilities.

As exports slump, the institute forecast domestic demand would also shrink with private investment expected to drop by 24.04 percent this year, the report said.

The consumer price index was forecast to dip 0.69 percent this year while the unemployment rate was predicted to reach 5.88 percent, a record high if realized, the report said. Unemployment stood at 5.75 percent in February and the statistics bureau will release last month’s data next week.

CIER said the New Taiwan dollar was likely to trade at an average of NT$33.6 against the US dollar this year.

CIER’s revised GDP forecast is lower than the government’s predicted 2.97 percent drop released in February, but more optimistic than the 4.8 percent decline estimated by Polaris Research Institute (寶華綜合經濟研究院) last month.

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