The IMF has trimmed its forecast of economic contraction for Taiwan from 7.5 percent to 4.1 percent this year, saying its fiscal and monetary policy helped to ease tensions in financial markets and mitigate the decline in domestic demand.
The global body, which updates its projections twice a year in its World Economic Outlook report, expected the nation’s GDP to expand by a modest 3.7 percent next year, from the zero growth it estimated in April.
The report, released on Thursday, said the electronics sector was leading the rebound in Taiwan and other manufacturing-oriented economies in Asia, whose equity markets saw an increase in capital inflows from January through August after risk aversion dropped significantly.
The report warned, however, that a sustained recovery was uncertain given a weak labor market, which could curb consumption.
It added that a strong recovery in external demand was still lacking and excess production capacity could dampen investment demand.
The region, including Taiwan, is faced with another challenge — the decision when and how to withdraw policy support while ensuring a successful transition to more balanced medium-term growth, the IMF said.
The IMF suggested that Asian economies shift their focus to promoting growth through domestic demand to make them less vulnerable to fluctuations in global demand.
Governments can provide fiscal support to encourage private consumption and strengthen social safety nets to reduce precautionary saving by households, the organization said.
Doing so would free up resources for consumption and enlarge markets for goods and services suppliers, it said.
RSS