Two more foreign institutes have lowered their forecasts for the nation’s GDP growth on concerns that the global financial crisis is hitting its export-driven economy harder than expected.
The IMF and Standard Chartered Bank yesterday projected that the economy would shrink by 7.5 percent and 3.5 percent respectively this year, mainly because of a sharp decline in exports and private investment.
“The impact of the global crisis on economies in Asia has been surprisingly heavy,” the IMF said in its latest report on the global economic outlook.
Its forecast of a 7.5 percent contraction in Taiwan’s GDP growth would put the country behind South Korea and Hong Kong, but ahead of Singapore, which is expected to see a 10 percent contraction.
In January, the IMF estimated a contraction of 4 percent for Taiwan’s economy this year.
Standard Chartered Bank revised its projection to minus 3.5 percent growth from minus 1.5 percent three months ago.
“Taiwan’s economy remained depressed in the first quarter following a record 8.4 percent drop in the fourth quarter [of last year],” Tony Phoo (符銘財), the bank’s chief economist in Taipei, told a media briefing.
Phoo said grim data for the first three months had prompted the adjustment, adding that a recovery was unlikely until next year.
“Declines in exports, industrial output and capital-goods imports may have caused GDP to contract another 7.2 percent” in the first quarter, Phoo said.
Outbound shipments, a mainstay of the economy, are likely to drop 36 percent and 30 percent in the second and third quarters respectively, after falling 36.6 percent in the first quarter from the same period last year, the economist said.
He put the fourth-quarter decline at 6 percent.
Sagging private investment, another drag on the economy, is not expected to pick up any time soon because of the uncertain economic outlook, Phoo said.
But the worst of the down cycle is probably over and the recession will decelerate to 4.7 percent, 1.4 percent and 0.5 percent for the remaining three quarters, he said.
While the IMF projects zero growth for Taiwan next year, Standard Chartered predicted positive growth of 2.6 percent next year, boosted by trade with China.
“Warming cross-strait ties are starting to bear fruit, especially in the tourism and logistics sectors,” Standard Chartered said in a report yesterday. “The number of Chinese tourists applying to visit Taiwan reached the daily limit of [3,000] in April.”
If the number of Chinese visitors increases by 1 million per year, GDP could expand by 0.3 to 0.4 percentage points, not including induced effect, Phoo said.