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Investment freeze might prove less dismal: economists

The freeze in private investment, consistently cited as the main drag on the nation’s economy this year, may prove less dismal in the second half after major domestic high-tech firms announced plans to raise capital spending, economists said yesterday.

The Directorate-General of Budget, Accounting and Statistics (DGBAS) forecast in May that private investment would contract 29.02 percent this year, pulling down GDP by 3.7 percentage points, while the economy was predicted to shrink 4.25 percent.

The gauge is expected to show modest improvement when the statistics agency revises major economic data around Aug. 20.

Jack Huang (黃蔭基), head of research at SinoPac Financial Holdings Co (永豐金控), said he spotted signs of thawing in private investment and his company would adjust the reading upward in one or two weeks.

Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s biggest contract chipmaker, said on Wednesday it would boost its capital expenditure 53 percent for the year to US$2.3 billion to meet stronger-than-expected demand.

UMC

A day earlier, United Microelectronics Corp (UMC 聯電), the world’s second-largest contract chipmaker, said it would raise capital spending from US$400 million to US$500 million for the year.

Huang said the semiconductor sector was likely to see 20 percent growth this quarter from the second quarter, with the pickup in chipmaking momentum trickling down to downstream firms later.

“The improvement is slow but secure for the rest of the year with private investment data likely to turn positive in the final quarter,” Huang said by telephone.

Private investment is estimated to fall 29.05 percent this quarter after plunging 41 percent in the first three months and may have contracted another 34.4 percent last quarter, the DGBAS said. It put the decline for the fourth quarter at 6.52 percent.

Johnny Chen (陳擎宏), deputy manager of the economics and industry research department at First Commercial Bank (第一銀行), said the real figures would turn out better, when DGBAS releases the numbers later this month.

BRIGHTER OUTLOOK

Chen attributed the rising capital expenditure to brighter outlook for this quarter, but said it was unclear if the momentum could last into the fourth quarter as the world economy remained weak.

Chen said the economy at home and abroad was in “a jobless recovery,” and firms were ambivalent about expanding.

“Companies intent on growing have to make moves months ahead,” Chen said. “They are doing so uneasily because rising unemployment may dampen demand.”

Tony Phoo (符銘財), chief economist at Standard Chartered Bank, echoed the mixed sentiment.

Phoo said the nation’s economic state was slightly ahead of market expectation, but added that restocking has played the main driver. Phoo said demand from the US and Europe have to pick up for the momentum to continue in the fourth quarter.

“Jobless rates there continue to climb, making Christmas orders unpredictable,” Phoo said. “The picture will be clearer in September or October.”
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