Taiwan will have trouble achieving 4.5 percent GDP growth this year because of adverse economic conditions at home and abroad, an economist with a local think tank said yesterday.
Taiwan Research Institute (台灣綜合研究院) president Wu Tsai-yi (吳再益) said the suspension of operations at plants in Formosa Plastics Group’s (FPG, 台塑集團) naphtha cracking complex in Mailiao (麥寮), Yunlin County, Europe’s debt problems and economic stagnation in the US were among the factors that led him to lower his GDP forecast for the year from 5 percent.
Wu said the Directorate-General of Budget, Accounting and Statistics lowered its 5 percent growth forecast to 4.81 percent in August, but the adverse impact of a string of fires at FPG’s petrochemical complex had not yet become evident.
The suspension of operations at a number of facilities at the complex for safety checks and maintenance following the fires, which has taken a bite out of the group’s sales, could also cost Taiwan 0.3 percentage points in GDP growth this year, he said.
The European debt problem has caused weakening global demand and thus directly affected Taiwan, an economy heavily dependent on exports, Wu said.
At the same time, Taiwan has not been able to isolate itself from the turmoil seen in global stock markets in recent months, Wu said, resulting in lower capital gains for Taiwanese investors and slumping consumer confidence that could drive down consumption.
“I would say that the next round of GDP growth forecasts, to be made at the end of October, will be between 4.3 percent and 4.5 percent,” Wu said.
On Friday last week, the Ministry of Finance reported that Taiwan’s exports fell 4.6 percent to US$24.61 billion last month from August, lower than the US$25 billion expected by the market and the lowest of any month this year.
While last month’s export figure was still up 9.9 percent from a year earlier, Steven Yang (楊家彥) from the Taiwan Institute of Economic Research (台灣經濟研究院) said that because exports serve as an engine pushing Taiwan’s economy, falling global demand is likely to drag down GDP growth.
Yang said the government needed to closely monitor whether local companies resort to furloughs or layoffs in the near future because of falling overseas sales.
An 8.8 percent month-on-month drop and a 24.7 percent annualized decline in capital equipment imports to US$2.92 billion last month pointed to a cautious approach on future expansion in the private sector, he said.
Slowing growth in imports — up 10.8 percent year-on-year to US$22.84 billion last month, following growth of 25.7 percent in April — is also a source of concern, economists say, because it is indicative of weak domestic investment and consumption.
Hu Sheng-cheng (胡勝正), an academic at Academia Sinica, said yesterday that the decline in exports of high-technology products, slower private investment and weakening consumer spending meant that economic growth was “very likely” to be lower than 4.5 percent this year.
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