Council for Economic Planning and Development (CEPD) Minister Christina Liu (劉憶如) said yesterday that despite rising concerns about the global economy, a double-dip global recession may not happen because of Asian emerging markets’ stronger economic fundamentals.
Liu’s remark came after the TAIEX tumbled 5.58 percent, or 464.14 points, to close at 7,853.13 yesterday, following Wall Street’s slide a day earlier on the growing bearish sentiment over the future economic outlook in the US and the eurozone debt crisis.
Liu attributed the US stock market’s tumble to investors’ worries about the middle to long-term US debt problem amid ongoing differences of opinion between the Democratic Party and the Republican Party.
As for the local stock market’s slump, which showed investors’ concerns about global financial turmoil, Liu said that investors should not be too worried because there may not be another global recession ahead.
“The current global economy is different from the situation in 2008, as the growing momentum in Asian emerging markets remains abundant,” Liu told a media briefing.
Liu said the economic fundamentals in Asian emerging markets remain strong because they are now more dependent on domestic demand rather than on exports to the US and Europe.
Therefore, even if the economies in the US and eurozone fall back into recession, Asian economies may be stronger, more resilient and be impacted less than in the financial tsunami of 2008, Liu said, adding that “the recession in the developed economies may also not occur.”
Liu remained optimistic on Taiwan’s economy, saying that growth would still top the region this year and stay above the 5 percent level as long as no other major global economic disasters happen.
Hu Sheng-cheng (胡勝正), a research fellow at Academia Sinica and a former CEPD minister, said the government would be likely to revise downward its forecast for economic growth this year to below 5 percent.
Citing recent economic data, Hu said the US and eurozone economies are not faring well, while the Japanese economy has been dampened by the earthquake and tsunami in March, as well as the recent drastic appreciation of the yen.
Worse still, China’s economy has also shown signs of a slowdown, despite Beijing’s relatively easy-going monetary policy, he added.
“All these factors could affect our export trade, which remains Taiwan’s key growth engine,” Hu said.
The Directorate-General of Budget, Accounting and Statistics (DGBAS) revised downward its forecast for GDP growth this year to 5.01 percent, from 5.06 percent, at the end of last month. It is scheduled to release an updated forecast on Aug. 18.
Cheng Cheng-mount (鄭貞茂), chief economist at Citigroup in Taipei, said concerns over the turmoil on financial markets may weigh on the central bank’s decision to tighten monetary policy.
“The concerns over the global economic outlook may lead the bank to pause its monetary tightening measures earlier than expected,” Cheng said in a research report yesterday.
However, in the short term, Cheng said the central bank was still likely to raise rates at its board meeting next month because current rates are still accommodative and also behind the curve, compared with other Asian central banks.