The Taiwan Research Institute (TRI, 台綜院) forecast yesterday that the economy will expand 5.88 percent for the full year, lower than the government’s estimate of 6.14 percent, while unemployment would still remain higher than 5 percent at the end of this year.
The Taipei-based think tank said despite robust economic growth, stagnant wage growth and a widening wealth divide could limit internal demand and that the ongoing European debt crisis had added uncertainty to the nation’s economic outlook.
“It would be very difficult to reduce unemployment by 1 percentage point with a year, but with the government’s various employment incentive programs, the unemployment rate could hover around 5.2 percent by the end of this year,” TRI president Wu Tsai-yi (吳再益) told an economic forum.
TRI forecast GDP will grow 7.08 percent in the second quarter, 4.05 percent in the third quarter and 0.56 percent in the fourth quarter. This compares with the government’s prediction of 7.66 percent, 4.4 percent and 0.69 percent respectively.
Remaining more conservative about this year’s economic growth than the government, Wu noted that the Directorate-General of Budget, Accounting and Statistics’ estimate last month didn’t take into consideration the potential fallout of the eurozone credit crisis.
“Many European countries have adopted austerity measures to curb worsening fiscal deficit, which will more or less suppress economic growth in the eurozone. The weakening euro has prompted us to revise downward our exports forecasts by about 0.5 percentage points for this year,” Wu said.
Attributing this year’s economic growth chiefly to rising external demand and private investment, the research agency forecast that exports will grow 16.77 percent from a year ago for the full year, compared with last year’s 9.11 percent decline.
Private investment is forecast to grow 17.37 percent, up from last year’s contraction of 18.38 percent, because of a government-proposed trade pact with China, but Wu said total investment this year would still fall short of the NT$80 billion (US$2.5 billion) recorded in 2008.
With a strong rebound in exports and increasing consumer and investor confidence amid the solid economic recovery, TRI said imports were likely to see growth of 19.8 percent this year, compared with last year’s 13.44 percent decline.
Government expenditure is expected to grow 1.08 percent, down 2.57 percentage points from last year’s 3.65 percent, as the nation’s fiscal deficit continues to expand because of various public construction projects and tax reduction measures to spur economic growth.
Public investment will likely see a slight contraction of 0.33 percent from a year earlier, compared with 14.25 percent growth recorded last year, TRI said.
Wu said there is not expected to be inflationary pressure this year, as the consumer price index is forecast to rise 1.47 percent for the full year, which he said is far below the central bank’s benchmark of 3 percent.
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