Taiwan may manage to maintain GDP growth of 4.02 percent next year, driven by external demand, if the European debt crisis does not deteriorate, hurting already slowing exports, the Taiwan Research Institute (TRI, 台灣綜合研究院) said yesterday.
“Despite slowing global trade activity, Taiwan may keep its GDP growth above the 4 percent mark” TRI president Wu Tsai-yi (吳再益) told a media briefing.
Wu, who also sits on the -Directorate-General of Budget, Accounting and Statistics’ GDP panel, said the forecast was based on expectations the European debt problem would improve, despite there being no quick remedy in sight.
If the eurozone fails to rein in the sovereign debt storm, Taiwan’s GDP may lose 0.3 percentage points next year, Wu said.
Europe accounts for 10 percent of the nation’s exports, government statistics showed.
Private investment, which accounted for 16.05 percent of GDP over the past decade, is expected to fall 13 percent to NT$2 trillion (US$65.89 billion) next year, compared with a forecast of 13.3 percent this year, Wu said.
The government should take steps to encourage private investment and lift the overall value above NT$2.5 trillion, Wu said.
Taiwanese firms’ profitability and competitiveness are weakening the economist said, adding that the situation will worsen after South Korea’s free-trade agreement with the US takes effect.
External demand is expected to generate 66 percent of GDP growth next year, down from 80 percent this year, indicating Taiwan remains heavily dependent on exports, Wu said.
Domestic demand, which is predicted to supply only 30 percent of GDP growth next year, is not strong enough to replace exports, Wu said.
That is because private consumption will account for less than this year’s 60 percent of GDP, after staging a remarkable comeback last year by fueling 77 percent of GDP growth that year, the economist said.
“The stock market tumble and reports of business downsizing will lead consumers to become conservative about spending,” Wu said.
The cautious sentiment will dampen demand, keeping inflation pressure well contained at 1.28 percent next year, he said.
The jobless rate is likely to average 4.35 percent next year, compared with an estimated 4.4 percent this year, thanks to government job creation programs, he said.
The New Taiwan dollar is expected to trade at an average of NT$29.87 against the US dollar next year, compared with an average of NT$29.47 this year, Wu said.