Polaris Research Institute (寶華綜合經濟研究院) yesterday trimmed its forecast for Taiwan’s economic decline this year to 3.76 percent from its June estimate of a 4.6 percent contraction, based on improving exports and private investment in the second half.
Polaris president Liang Kuo-yuan (梁國源) said the economy would reach positive territory in the final quarter due to a low base in the same period of last year and a rebound in external demand.
“The nation’s GDP will regain positive growth in the fourth quarter in line with improving economic conditions at home and abroad,” Liang said.
The think tank predicted GDP would contract 2.67 percent this quarter and expand by 5.79 percent in the final three months.
Liang said signs of a global recovery grew increasingly clear as seen in better-than-expected economic data by major economies.
“The world trend is benefiting the nation’s export-dependent economy, as seen in narrowing export and private investment contractions,” he said.
Meanwhile, Polaris forecast GDP would post 4.1 percent growth next year, with exports expected to pick up 11.53 percent.
Liang said the expansion would have more to do with the base effect than economic momentum. The industrial sector would be the main driver, contributing 78.1 percent, while the service industry would chip in the remaining 20.91 percent, he said.
“External demand will account for 52.6 percent of GDP in 2010, while domestic demand will supply another 47.4 percent, as the government is likely to spend less,” Liang said.
There are still risks, Liang said, including the A(H1N1) virus, raw material prices, China’s macro-economic policy and US and European markets. If any of these factors turns unfavorable, the economy will suffer, he said.
The NT dollar will trade at an average of NT$33 against the greenback this year and strengthen to NT$32 next year, Polaris said. It said consumer prices would contract 0.6 percent this year and rise 1.04 percent next year.
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