Wed, Oct 24, 2012 - Page 13 News List

Strength of economic recovery uncertain: TRI founder

FEELING INSECURE:Although Taiwan has abundant human resources and capital, a lack of confidence among companies has led to weak investment, Liu Tai-ying said

By Amy Su  /  Staff reporter

Taiwan Research Institute (TRI, 台灣綜合研究院) founder Liu Tai-ying (劉泰英) yesterday said it was too early to tell whether the nation’s economy had bottomed out in the third quarter, citing weak confidence in the private sector.

Both exports and export orders for last month showed annual increases that ended six consecutive months of decline, but Liu said the nation needed to see more positive signs in the leading economic indicators to confirm the strength of economic recovery.

The government must implement measures to increase domestic demand and boost confidence in the financial market, he said.

“Confidence will be a key factor in leading Taiwan’s economy to rebound,” Liu told a media briefing after hosting an economic forum on global central banks’ quantitative easing measures.

The global economic slowdown has been the major downside for Taiwan’s economy this year.

Despite major economies adopting quantitative easing measures in a bid to support growth momentum and solve financial problems, the effect of these measures would be limited, Liu said.

The persistent eurozone debt crisis and a grim outlook on corporate earnings have negatively affected investors’ confidence, driving down transaction volume in the local stock market, Taiwan Stock Exchange’s data showed.

Daily trading volume was NT$45.875 billion yesterday on the main bourse, down from NT$49.081 billion on Monday, data showed.

Liu said Taiwan still has abundant human resources and does not lack capital.

However, the lack of confidence among domestic companies about the prospects of their businesses has led to weak private investment, which is detrimental to the national economy, he said.

Private investment is forecast to fall 1.03 percent this year from last year, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said on Aug. 17, when it revised downward its forecast for GDP growth this year to 1.66 percent from its previous estimate of 2.08 percent.

Given that the growth momentum of external demand is not likely to recover substantially over the next few years, and the DGBAS forecast Taiwan’s exports to contract 1.72 percent this year, the first contraction since the global financial crisis, the government should launch solid industrial policies to help rebuild the private sector’s confidence and boost domestic demand, Liu said.

However, National Taiwan University finance professor Shen Chung-hua (沈中華) expressed a more optimistic view, saying that he expected the economy to recover slightly next year due to the regular business cycle.

The DGBAS forecast the economy would expand 3.67 percent next year on the back of recovering global trading momentum.

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