Thu, Mar 17, 2011 - Page 12 News List

Quake could lower GDP 0.5 points: CEPD

AFTERSHOCK:Japanese suppliers to Taiwanese firms are being damaged by blackouts, but Merrill Lynch believes Taiwan will only lose 0.1 points of GDP

By Amy Su  /  Staff Reporter

Japan’s earthquake could lower Taiwan’s GDP growth by 0.5 percentage points at most this year if its planned power cuts and nuclear crisis do not worsen, Council for Economic Planning and Development (CEPD) Minister Christina Liu (劉憶如) said yesterday.

The explosion at the Fukushima Dai-ichi nuclear power plant and power outages following the massive quake and tsunami that hit Japan on Friday have heightened worries about Taiwan’s economy, as local industries such as semiconductors, flat panels and automobiles rely greatly on Japan’s component supply chains, Liu said.

“If the power cuts last only one week as planned, Taiwan’s corporations can use their inventories of components to deal with the temporary shutdown of their Japanese supplying partners, and the influence on Taiwan’s economy will be under control,” Liu told a media briefing.

If this is the case, Taiwan’s GDP growth might be lowered by no more than 0.5 percentage points this year, while Japan’s GDP growth might be lowered by 0.25 to 1 percentage points, Liu said.

In December, the CEPD set its GDP growth target of 4.8 percent for this year. Last month, the Directorate-General of Budget, Accounting and Statistics adjusted its growth forecast downward for this year from 5.03 percent to 4.92 percent.

Local companies have sufficient inventories of components for one week, but they may face shortages if Japan’s power cuts last longer, which would reduce the capacity of related suppliers there, Liu said.

That might deepen the negative influence on Taiwan’s economic growth, but a more accurate assessment of the impact would be available a month from now when more information is available, she added.

Sharmila Whelan, a senior economist of Bank of America Merrill Lynch, is more optimistic about Taiwan’s economic situation than Liu, saying the nation’s GDP growth would only lose 0.1 percentage points this year because of the quake.

“Although Taiwan is one of the countries that most relies on imports from Japan, its good structure on stronger domestic consumption and less unemployment will drive up the growth of GDP this year,” Whelan told a media briefing yesterday.

Stronger fundamentals mean Taiwan’s economy would not be hurt too badly compared with the impact on GDP growth in other Asian countries, which Merrill Lynch also forecasted to be lower by 0.1 percentage points this year because of the quake, Whelan said.

The brokerage expected Taiwan’s GDP to grow 4.8 percent this year, Whelan added.

The local stock market rebounded 1.09 percent yesterday to close at 8,324.58 points on bargain-hunting.

The market tumbled 3.35 percent a day earlier because of worries about the Japanese nuclear crisis.

Kinger Lau (劉勁津), executive director at Goldman Sachs Group Ltd, said the market has overreacted to Japan’s nuclear crisis and maintained his bullish view on Taiwan’s stock market this year.

“We are still optimistic about the local stock market’s uptrend this year, driven by momentum from stronger economic recovery in the US, because history shows that Taiwan’s stock market has a positive relationship with the US economy,” Lau said at a press conference in Taipei.

The earthquake will not stop the benchmark TAIEX from reaching the brokerage’s target of 10,000 by the end of the year, Lau said.

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