Despite continuing uncertainty over the eurozone debt crisis, Taiwan’s economy is expected to bottom out by April thanks to the recovering US economy, Council for Economic Planning and Development (CEPD) Vice Chairman Hu Chung-ying (胡仲英) said yesterday.
Hu said he was cautiously -optimistic about the global economy this year because the strength of the US economy would partly offset the negative impact of the European debt problem.
Hu’s remarks came a day after the World Bank warned of a possible slump in its Global Economic Prospects report.
The report said a recession in Europe and a slowdown in developing countries would hurt the world economy as a whole.
The World Bank cut its growth forecast for the 17 eurozone countries from 1.8 percent to minus 0.3 percent this year, and trimmed its forecast for developing countries this year from 6.2 percent to 5.4 percent. It forecast that the US economy would grow 2.2 percent this year.
“The rising strength of the US economy is far stronger than the downside drag from Europe,“ Hu told a media briefing.
However, this does not mean the eurozone’s debt problem would not impact Taiwan’s economy at all, he added.
Since the peak period of European countries’ debt repayment would be between next month and April, Hu said this would drag down Taiwan’s economy in the first quarter, with the potential impact on the economy extending even into April.
However, if the eurozone’s debt problem could be solved or controlled in the first quarter, Taiwan’s economy would rebound after the first quarter as it benefited from the rising US economy, he said.
“This would help Taiwan to maintain at least 4 percent economic growth this year,” Hu said.
On Wednesday, Minister of Finance Lee Sush-der (李述德) said the economic problems in Europe could lead to reduced tax revenues in Taiwan of between NT$1 billion (US$33.4 million) and NT$10 billion.
Since Taiwan’s annual tax revenue is about NT$1.7 trillion, Lee said an estimated reduction of NT$1 billion to NT$10 billion would be tolerable.
Taiwanese banks hold “tens of billions of NT dollars” in European government debt, but that has “little impact” on Taiwan’s financial system, he said.
Lower purchasing power in Europe would affect Taiwan’s export industry and its employment rate, but the Ministry of Economic Affairs has designed countermeasures for that, he added.
Additional reporting by CNA