The global economy has stepped into a “new and mediocre stage” after the 2008 financial crisis, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday.
While the US might play the most important role in supporting the global economy, including Taiwan’s outbound shipments, strong growth momentum seen previously is unlikely to emerge amid continual uncertainty, the Taipei-based institute said.
The global economy is likely to step into a “flat” stage, CIER president Wu Chung-shu (吳中書) said at a media briefing, while adjusting downward the institute’s GDP growth forecasts for Taiwan this year and next year.
The institute now expects Taiwan’s economy to expand 3.43 percent this year, compared with the 3.46 percent growth forecast it made in October.
For next year, the nation’s economy is predicted to show a 3.5 percent expansion, down 0.03 percentage points from the institute’s previous estimate.
Wu attributed the adjustment for GDP growth this year to recent food safety scandals — which have dragged down private consumption — as well as weaker-than-expected global economic recovery, especially in Europe and Japan.
“The slowing pace of global economic recovery has led the nation’s exports to show slower-than-expected expansion compared with the institute’s previous estimate,” Wu said.
Goods and services exports are predicted to grow 5.77 percent this year and 7.35 percent next year, while imports of goods and services might increase 6.06 percent this year and 6.36 percent next year, according to CIER’s forecast.
The consumer price index (CPI) would show a 0.89 percent rise next year, slower than the 1.19 percent it estimated for this year. Private consumption is expected to grow 2.78 percent next year, compared with the 2.76 percent increase estimated for this year, the institute said.
Global crude oil prices have plummeted almost 50 percent since June, and CIER said if oil prices continue to trend lower, the nation’s GDP growth could accelerate.
Credit Suisse AG said the sharp decline in global oil prices could help to keep Taiwan’s CPI stable, boost the current-account surplus and enhance private consumption.
Hong Kong-based Credit Suisse economist Christiaan Tuntono said in a note on Monday that a 40 percent decrease in oil prices is estimated to take away an increase of 1.9 percentage points for CPI inflation in Taiwan, while cheaper oil would widen the nation’s current-account surplus by 1.1 percent of GDP and stimulate private consumption, adding 1.1 percentage points to GDP growth.
Credit Suisse said the nation’s GDP growth would be 3.5 percent next year, compared with the 3.6 percent growth it forecast for this year.
“Despite cheaper fuel, we expect challenging global demand conditions to create more headwinds on growth next year,” Tuntono wrote in the note.
Despite challenges ahead, nearly half of the nation’s manufacturing purchasing managers said they expected business sentiment would improve next year from this year, according to a survey conducted by CIER.
In the survey, 46.7 percent of respondents said they were optimistic that business would show an upturn in the coming 12 months, while 14.6 percent said they were pessimistic.
However, respondents said they held a relatively conservative attitude toward inventories, as the trend of declining profitability might extend into the first half of next year from the second half of this year, the institute said.
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