Sat, Jun 15, 2013 - Page 13 News List

Scaling back US easing risky, TRI says

MAJOR PARTNER:While a number of global economic factors could affect Taiwan’s economy, the US Fed’s quantitative easing is the most important, the institute said

By Amy Su  /  Staff reporter

The Taiwan Research Institute (TRI, 台灣綜合研究院) warned yesterday that global economic momentum may be significantly damaged if the US decides to trim its third round of quantitative easing.

The think tank made the comments after revising downward its forecast for GDP growth this year by more than half to 2.14 percent, from the 3.57 percent it estimated in December last year.

The institute’s latest GDP forecast was the lowest among all domestic think tanks, and also lower than the 2.4 percent growth estimated by the Directorate-General of Budget, Accounting and Statistics (DGBAS) last month.

“Weaker-than-expected economic growth in the first quarter of the year, led by sluggish momentum in private consumption, was the major factor behind the downward revision,” TRI president Wu Tsai-yi (吳再益) told an economic outlook conference.

Wu said a number of global economic uncertainties could affect the nation’s economy, with the timing of the US Federal Reserve’s decision to scale back quantitative easing the most important.

However, without a solid improvement in the US unemployment rate and slowing the growing headline inflation rate in the US, recklessly trimming easing may seriously hurt the global economy, Wu said.

Domestically, other than stagnancy in real wages, Wu said the recent issue of food safety may damage private consumption, which may only expand by 1.31 percent this year.

In addition, compared with the Japanese and South Korean currencies, the New Taiwan dollar has declined less against the US dollar this year, further damping demand and affecting exports, Wu said, adding that the institute expected the nation’s export sector to grow by 4.65 percent this year.

However, private investment may grow by 6.49 percent this year as the main driver for the economy, with the semiconductor and telecom sectors expected to fuel momentum, Wu added.

On consumer prices, the institute forecast the headline inflation rate would increase by 1.33 percent this year from last year.

However, DGBAS statistics division director Tsai Hung-kun (蔡鴻坤), who was invited to join the conference, said currency depreciation was not the only nor the most important factor behind the sluggish export momentum.

“The problem of domestic industries lacking competitiveness may be more serious,” Tsai said at the conference.

However, Tsai shared the institute’s view on private consumption, saying that public concern over food safety may impact demand on the food industry, which has sales of about NT$400 billion (US$13.35 billion) a year.

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