The nation’s economy may not be able to grow 3 percent this year after the country reported much worse-than-expected GDP growth for the first quarter of the year, an economist said on Saturday.
Ray Chou (周雨田), a research fellow with the Institute of Economics of Academia Sinica, said that he was not upbeat about the nation’s economic climate and did not rule out the possibility that the economy may not be able to reach 3 percent growth this year, although the economic think tank has forecast a 3.05 percent increase.
The Directorate General of Budget, Accounting and Statistics (DGBAS) is scheduled to release its updated forecast of this year’s economic growth on Friday.
The market has widely expected the DGBAS will cut its forecast from the estimate of a 3.59 percent increase it made in February.
In the first quarter, the economy grew 1.54 percent from a year earlier, much lower than the DGBAS’s previous prediction of 3.26 percent, citing the worse-than-expected gloomy global economy and weak domestic consumption as factors.
According to the DGBAS, real exports of merchandise and services after inflation adjustments grew only 4.84 percent in the first quarter, compared with a previous forecast of a 6.20 percent increase.
Chou said that sluggish demand in Europe had impacted exports from China, where many Taiwanese manufacturers operate and sell their products.
Given that Europe is a major buyer of goods from China, Taiwanese exports have been affected, Chou said.
“Many people fail to pay close attention to the impact on Taiwan from the unfavorable European conditions,” Chou said.
In addition, Chou said the nation’s export focus on a narrow range of businesses, such as smartphones, which are susceptible to industrial cyclical volatility, and exports have been hurt accordingly.
Chou said the local economy has also suffered declining private consumption as local wage growth stagnates and the pension fund issue remains unresolved, both of which have lowered the public’s willingness to spend.
In the first quarter, Taiwan’s private consumption rose 0.35 percent from a year earlier, down from a 1.55 percent year-on-year increase in the fourth quarter of last year.
Government consumption fell 0.52 percent, continuing from a decline of 1.71 percent recorded a quarter earlier.
The DGBAS said economic growth for the year would lower than its earlier estimate in February as exports last month fell 1.88 percent from a year earlier to US$25.1 billion.