Economic growth next year could slow to as low as 2 percent, if a new economic crisis hits the world, the central bank warned on Thursday, citing a forecast by Asian Development Bank (ADB).
The central bank issued a 30-page report on Thursday evening on how the European debt problem could adversely impact the nation’s economy next year.
Taiwan’s economy had been expected to grow 4.1 percent next year, more than a 3.9 percent growth forecast for South Korea — Taiwan’s major export competitor — under the current circumstances, the bank said, citing data from the ADB issued on Dec. 6.
However, if the eurozone’s debt crisis deteriorates, it could severely hurt Taiwan’s economy next year and would bring down economic growth to a level lower than South Korea’s GDP growth, based on the three worsening scenarios simulated by the ADB.
In the worst-case scenario, in which the European debt problem initiates a global economic crisis, Taiwan’s economic expansion for next year might be held down to 2 percent, lower than a 2.5 percent growth forecast in South Korea, the report said.
As for the other two cases, in which the European debt crisis results in an economic depression in the eurozone and the US, or only in the eurozone itself, Taiwan’s GDP growth could fall to 2.6 percent or 2.9 percent respectively, both under a forecast of 2.9 percent or 3.1 percent for South Korea, ADB data showed.
The central bank said the eurozone’s debt problem had not only dragged down exports to Europe, but would also have negative influence on exports to China and the US.
Growth in exports to EU has turned negative, to minus 0.1 percent, since June, while exports to the US have fallen to 9.5 percent during the same period, from a 28.4 percent growth rate in the first half of the year, the bank said, citing the Ministry of Finance’s data.
The bank said it was concerned that the worsening momentum on exports would hit the nation’s investment, increasing the unemployment rate.
This could weaken consumers’ confidence and impact the stock market, the bank said.
The central bank’s warning was different from the Council for Economic Planning and Development’s (CEPD) relatively optimistic tone.
Earlier this month, the council set a target of 4.3 percent for economic growth next year because it expects better-than-expected growth in private investment to help counter weakening exports amid the global economic slowdown.