Academia Sinica (中研院) yesterday raised its GDP growth forecast for this year to 3.42 percent, from the 3.31 percent estimated in July, citing better exports and private consumption.
The pace might decelerate to 3.38 percent next year, as China’s economic slowdown could dampen external demand and government spending is set to contract further from this year, Academia Sinica research fellow Ray Chou (周雨田) said.
China, which accounts for about 40 percent of Taiwan’s exports, might not see aggressive economic growth in the future due to an increasingly large base and continued economic reform, Chou said.
“The trend, together with disappointing showings in Europe and Japan, is unfavorable for Taiwan’s export-reliant economy,” the research fellow said.
Uncertainty emerged last quarter and has become more evident this quarter, with GDP growth likely ebbing to 2.83 percent, weaker than the 3.64 percent expansion in the first three quarters of the year, the research institute said in a semiannual report.
The US remains on the track of stable recovery, benefiting Taiwanese firms, especially those in Apple Inc’s new handset supply chain, Chou said.
As a result, Taiwan has achieved economic growth of between 2 and 4 percent in recent years, but it is unlikely to see growth of above the 4 percent level, Chou said.
Fortunately, private consumption is resilient and stable, expanding by 2.86 percent in the first three quarters, although it might ease to 2.48 percent this quarter following a series of food scandals, the report said.
Consumer confidence could soon recover, as the disruptions from the food scandals fade, the report said, adding that the indicator could expand by 2.84 percent next year, from an estimated 2.77 percent this year.
Chou dismissed concerns over deflation after predicting that the consumer price index could inch up 0.7 percent next year, from the forecast of 1.17 percent for this year.
International crude oil prices might fall lower, as supply countries have not showed any plans to cut production, Chou said.
“Lower fuel and raw material prices would help save production costs for local manufacturers, giving them a motive to raise wages for employees,” he said.
The government is projected to spend NT$443.87 billion (US$14.2 billion) next year, representing a decline of 2.13 percent from this year, while public enterprises might slash spending by 14.9 percent to NT$196.05 billion, the report said.
Government spending is estimated to total about NT$453.52 billion this year, which represents a drop of 7.94 percent from a year earlier.
The New Taiwan dollar could weaken further to trade at an average of NT$30.98 against the US dollar next year, down from an estimated average of NT$30.39 this year, as widespread expectations of an interest-rate increase boost the US currency, the report said.
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