Taiwan’s GDP is expected to grow at a slower-than-expected annual rate of 3.96 percent this year, as worse-than-expected economic prospects in Europe would cut demand for locally made products, local think tank Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) said yesterday.
Three months ago, TIER projected that Taiwan’s GDP would expand 4.22 percent this year from last year.
“The major reason is that we found the world’s biggest economies weakened and their expansion was slower than we originally expected. First, it will erode Taiwan’s exports and then cut manufacturing output, household income and private consumption,” TIER president David Hong (洪德生) said.
He added that Taiwan was easily affected by uncertainty in the global economy as it was a small and open economy.
Exports are expected to grow 3.41 percent year-on-year this year, rather than the 4.77 percent TIER estimated in November last year.
The European economy is expected to remain flat or to decline 1.2 percent year-on-year this year, as eurozone debt problems are expected to spread from smaller economies to core members like Italy and even France, TIER said, citing a World Bank projection.
“The first quarter will be the bottom, but we only expect a recovery in the second half,” director of the institute’s macroeconomic forecasting center Gordon Sun (孫明德) told a media briefing yesterday.
GDP would grow 2.78 percent in the current quarter and peak at 5.14 percent in the final quarter of this year, TIER predicted.
Private consumption is expected to increase 2.91 percent this year, slightly lower than the 2.94 percent growth TIER had estimated.
The economic slump in Europe had a “milder impact on household income than the financial crisis of 2008-2009,” Sun said, given the smaller number of workers currently on unpaid leave.
Separately, a TIER survey last month indicated that local manufacturers have a more optimistic outlook, as 24.5 percent of the respondents expected business to pick up in the first six months. This is an increase from the 24.1 percent reflected in a survey conducted in November.
The business climate gauge for the nation’s manufacturing sector dropped for the fifth consecutive month to 88.5 last month, hitting the lowest level in 32 months, TIER said.