Taiwan Academy of Banking and Finance (台灣金融研訓院) chairman Cheng Cheng-mount (鄭貞茂) yesterday said a steady growth in private consumption would be the key driver for the economy next year against continuous downside risk on exports.
“Exports are still facing a grave situation next year,” Cheng said at a conference held by the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院).
Despite exports ending a six-month losing streak to post 10.4 percent growth last month from a year earlier, Cheng said most of the growth momentum came from shipments of Apple Inc’s new tablet and smartphones.
This indicated fundamentals in other export sectors had not shown significantly positive signs, he said.
While private consumption may offer relatively stable momentum for the economy next year, with private investment improving on the back of a low base, Cheng expressed concerns about the impact of a less promising employment market on private consumption.
The uncertainties in the labor market may drag down the nation’s consumption, further impacting its positive contribution to the economy, he said.
These downside risks are likely to prompt the government to further revise downward its forecast for GDP growth this year and next year, Cheng said. In August, the Directorate-General of Budget, Accounting and Statistics forecast GDP would expand 3.67 percent next year, following a projected increase of 1.66 percent this year.
Chiou Jiunn-rong (邱俊榮), an economics professor at National Central University, shared Cheng’s views.
“The jobless rate may get higher in the near future,” Chiou told reporters on the sidelines of the conference.
Although Taiwan’s unemployment rate fell last month to 4.32 percent from 4.4 percent in August, Chiou doubted the situation would improve in the months ahead.
The labor market remains unstable as employers consider reducing staff numbers according to the number of orders received, Chiou said, adding that major orders being received by local firms were rush orders.
TIER director Yang Chia-yen (楊家彥) said downsizing and layoffs at local firms could be unavoidable in the near future as inventory digestion in China — Taiwan’s largest export market — may last for another year.
Even though the government has launched several short-term measures to help stimulate economic growth, Yang said these might only lower the negative impact, instead of reversing the trend.
Separately, Taiwan Semiconductor Manufacturing Co (台積電) chairman Morris Chang (張忠謀) said yesterday he was pessimistic over the global economy amid political uncertainties in the US and Europe.
He also held a bearish view on Taiwan’s economy because of slowing exports and an appreciating New Taiwan dollar.
“I don’t see the light at the end of the tunnel,” Chang said during a 40-minute panel discussion in Taipei with visiting Nobel Prize in Economics winner Christopher Sims.
Additional reporting by CNA