The growth momentum of the nation’s domestic demand, one of the economy’s two major growth drivers, is losing steam, indicating weaker-than-expected economic prospects, Council for Economic Planning and Development Minister (CEPD) Christina Liu (劉憶如) wrote on a social networking Web site.
Taiwan’s economy is expected to experience “cold external [demand] and lukewarm internal [demand]” instead of “cold external [demand] but warm internal [demand]” in the near future, Liu wrote on her Facebook page on Friday.
“The latest economic data show that private investment growth has slowed, which may further drag down the overall momentum of domestic demand,” Liu said.
Domestic demand has this year joined exports to become another of the engines that fuel Taiwan’s economy, Liu has said.
In the face of continuing uncertainties over the eurozone’s debt crisis and the flailing US economy — both of which might negatively impact on Taiwan’s exports and domestic demand — investment and consumption play an important role in supporting the nation’s economy, Liu said.
The Directorate--General of Budget, Accounting and Statistics on Thursday cut its growth forecast for private investment this year to minus-2.75 percent, from the minus-1.72 percent growth it estimated in August, with growth for the second half of the year expected to be minus-11.69 percent, evidence domestic companies have turned more conservative on fixed investments.
Liu said the investment sector is the major driver of domestic demand, as more investment creates more job opportunities, further driving up the public’s spending power.
“For example, the high level of 33.84 percent growth in the private investment sector last year supported an ‘internally warm’ economic environment for this year,” Liu said.
The government has been in discussions for months to devise a way to enhance the momentum for domestic demand and is planning to announce a series of projects on Thursday, Liu said.
In addition, the government would move faster to remove investment barriers to attract more investors, Liu added.
As for exports, the other engine driving the economy, Liu said that enhancing intra-regional trade in Asia would help safeguard momentum on external demand.
Compared with figures from 2000, last year’s exports to some of Asia’s emerging markets have not shown much growth, Liu said, citing Ministry of Finance data.
Last year, exports to Indonesia, Thailand and the Philippines accounted for 1.6 percent, 1.9 percent and 2.2 percent of overall exports respectively, compared with 1.2 percent, 1.7 percent and 2 percent in 2000, the data showed.
The proportion of exports to Malaysia was 2.2 percent last year, compared with 2.4 percent in 2000, the data showed.
As Asian countries have strengthened over the past 10 years, the government should be focusing more on maintaining its exports to those countries to help keep Taiwan competitive, Liu said.
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