Government lowers growth outlook

CRUDE PRESSURE: The economy is more likely to grow at 4 percent this year, as soaring oil prices put the original goal of 4.5 percent beyond reach, the economics minister said


Sat, Sep 03, 2005 - Page 10

The government is aiming for economic growth of 4 percent this year, Minister of Economic Affairs Ho Mei-yueh (何美玥) said yesterday.

Addressing foreign journalists at a briefing in Taipei, Ho said that the spike in oil costs have put the government's original goal of 4.5 percent beyond reach, although 4 percent growth would be possible.

"A target of 4.5 percent is too high for us because of surging oil prices," she said.

The Directorate General of Budget, Accounting and Statistics (DGBAS) on Aug. 18 revised upward its economic forecast for the year to 3.65 percent from 3.63 percent on expected stronger growth momentum in the second half of the year.

In view of the recent surge in vegetable prices resulting from post-typhoon shortages and hikes in retail gasoline prices, the consumer price index (CPI) is estimated to increase by 1.97 percent from last year, DGBAS said at the time.

As the cost of crude oil futures in New York has risen more than 10 percent since then, reaching a record US$70.85 per barrel on Aug. 30, Ho said the nation's state-owned refiner will have to raise fuel prices unless crude costs decline.

"In the event that oil prices stay at about US$70 a barrel, Chinese Petroleum Corp (中油) should raise prices to reflect its higher costs," she said. "Now is not the right time because of the typhoon."

The nation's only private oil refiner, Formosa Petrochemical Corp (台塑石化), on Wednesday raised the prices of its wholesale gasoline products by NT$2.40 per liter and added NT$2 per liter to the price of diesel oil. This time, Chinese Petroleum did not match Formosa's price hike as it usually does.

Premier Frank Hsieh (謝長廷) yesterday called for a temporary suspension of domestic oil price hikes, saying that the country should "give it a few more days" to observe the situation before raising prices further.

Hsieh said that any adjustment of gasoline prices should take all factors into consideration, including current oil stocks, the overall domestic economic situation, market mechanisms and the interests of the underprivileged.

Food prices are expected to rise as a result of the damage inflicted by Typhoon Talim, which struck the nation this week, Ho said.

The minister added that she expects inflation to average more than the 1.97 percent forecast by DGBAS for this year, although a level below 3 percent would still be "acceptable."

To boost the nation's economy, Ho said, the country must focus on developing its technology industry.

"The strength of Taiwan is technology," she said. "We aim to develop Taiwan as an innovative research and development base."

To date, 28 multinational companies including Intel Corp, Microsoft Corp and Dell Inc have established research centers in Taiwan, Ho said. A further 87 domestic enterprises also have research units here, she added.