Wed, Aug 03, 2011 - Page 12 News List

Operations halt may affect economy: experts

By Amy Su  /  Staff Reporter

The suspension of Formosa Petrochemical Corp’s (台塑石化) refinery plants has raised uncertainties about the nation’s economic growth prospects this year, economists said yesterday.

However, the real impact would depend on the scale of the operations suspension, the length of the downtime and the company’s remaining stock, they said.

“In the worst-case scenario, the suspension may strike 1.5 percentage points off GDP growth [this year],” Liang Kuo-yuan (梁國源), president of the Taipei-based Polaris Research Institute (寶華綜合經濟研究院), said by telephone.

Liang said the preliminary estimates were based on the most pessimistic assumption that all the refinery plants in Mailiao (麥寮), Yunlin County, would be suspended for a year and that there are no other inventories or substitutes.

As such, the impact might be lower than this figure, as the government might only ask that the plants be suspended by stages within a year for safety inspections, instead of a simultaneous halt to all operations for a year, Liang said.

Liang’s estimates that the overall output value of the Mailiao naphtha cracker accounts for about 10 to 12 percent of Taiwan’s GDP.

Last week, the government said the nation’s GDP expanded 4.88 percent in the second quarter, outpacing its estimate of 4.64 percent growth. However, it adjusted downward its full-year economic growth forecast to 5.01 percent, from the 5.06 percent it estimated in May, as it forecast slowing demand for the nation’s exports in the second half of the year.

Chen Miao (陳淼), director of the Taiwan Institute of Economic Research’s (台灣經濟研究院) macroeconomic forecasting center, said that suspending Formosa Petrochemical’s operations would definitely have a negative impact on the economy as it would entail halting exports of its refinery products.

The suspension’s negative impact would be limited in the short term, as the company’s oil stocks, along with those of state-run refiner CPC Corp, Taiwan (台灣中油), should be able to fulfill domestic demand for the next two to three months, Chen said.

However, given the lack of information as to how long the company’s operations would be suspended, it is difficult to quantify how much it would affect GDP growth, he said.

“The government and the company may come up with a more feasible solution in the shortest time possible to avoid negatively influencing the economy,” he said by telephone.

Unlike Liang and Chen, UBS Wealth Management Research in Taiwan director Kevin Hsiao (蕭正義) was more optimistic.

“I do not think the incident will drag down economic growth much based on what information we have now,” Hsiao said.

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