Fri, Dec 24, 2010 - Page 12 News List

Analyst predicts slower economic growth next year

SOME EXPANSION:A tax cut extension in the US looks set to help boost Taiwan’s economy, while the ECFA could help expand exports to China

By Lisa Wang  /  Staff reporter

Taiwan’s economic growth could expand at a slower annual rate of 5 percent for at least the next year, supported by resilient demand from China and the US for electronic goods made by local firms, after a sharper-than-expected rebound this year from the global financial slump, Academia Sinica forecast yesterday.

One of the major factors would be US President Barack Obama’s signing of an US$858 billion tax cut extension package into law, raising prospects for the US economy next year, Academia Sinica said, citing close links between Taiwan and its major trade partner over the past decade.

That would also add between 0.4 percentage points and 1.1 percentage points to the nation’s GDP growth next year, to the 4.71 percent growth the institute originally forecast, Academia Sinica economist Ray Chou (周雨田) said.

The forecast exceeded the government’s prediction of 4.51 percent annual growth in GDP next year.

“[The] US tax cut package will have a positive impact on Taiwan’s GDP ... Taiwanese exporters, consumer electronic manufacturers, in particular, will benefit [from better US economic growth],” Chou said.

Exports of goods and services would grow about 7.71 percent annually next year, since exports to China are expected to increase because more items would be eligible for lower import duties with the signing of the Economic Cooperation Framework Agreement (ECFA) in June, Chou said.

Yesterday, Academia Sinica raised its GDP forecast for the nation this year to 10.31 percent, marking the strongest level in 23 years, benefiting from a rapid economic recovery in Asia’s emerging economies.

In July, the research institute estimated Taiwan’s GDP would grow 6.89 percent this year from last year.

“Inventory replenishment demand has accelerated the nation’s economic growth [this year],” Chou said.

Inventory demand is expected to grow to NT$116.22 billion (US$3.9 billion) for the whole year, a spike from the previous estimate of NT$58.3 billion, according to the research institute’s statistics.

Despite strong GDP growth this year and next year, the nation would not face a high inflation risk either this year or next year, Chou said, thanks to central bank’s appropriate monetary policies.

The consumer price index, which is used to gauge an economy’s inflation risk, was expected to rise to 1.87 percent next year, from 1.02 percent this year, the economist said.

An increase in the wholesale price index is expected to slow to 2.42 percent annually next year, as rising New Taiwan dollar against the US dollar would help offset the cost of imported commodities, Chou said.

This year, the wholesale price index may grow 5.36 percent year-on-year, he said.

The NT dollar would appreciate mildly versus its US counterpart, matching the uptrend of the Chinese yuan, Chou said, without giving a detailed forecast.

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