Taiwan will shift away from its traditional markets in advanced countries toward emerging Asian economies in line with the global trend, a visiting US economist said yesterday.
“Taiwan is going to become much more integrated with Asia than it has been in the past,” Dale Jorgenson said after delivering a lecture at the Taipei-based Chung-hua Institution for Economic Research (中華經濟研究).
“It’s going to be a painful process. It’s going to be expensive, and it’s going to take time,” he said.
Although China, an increasingly important market for Taiwan, will see its economic growth slow down, Asian markets, such as India, are still growing very rapidly, he said.
Moreover, there are positive developments in the US, also a very important trade partner with Taiwan, which “is right now turning around and getting back toward something like recovery,” the economist said.
However, Jorgenson said the US Federal Reserve’s third round of quantitative easing (QE3) will not have much effect on the economy.
“I don’t have very great expectations about what the quantitative easing and the United States are going to achieve,” he said.
Under the QE3 program, the Fed will spend US$40 billion a month to buy mortgage-backed securities for as long as it deems necessary. After including current bond buying measures, the Fed is expected to inject US$85 billion per month into the market.
“Monetary policy measures are not going to be very effective, so you can’t look for improvements from that source,” Jorgenson said, adding that a sustainable fiscal policy and a budget resolution may be the answer.
As Fed Chairman Ben Bernanke’s teacher, Jorgenson said he supports Bernanke’s basic approach, but the US is “stuck in a difficult situation and the Fed has a limited role to play.”
Jorgenson held a pessimistic view of European markets.
The situation in Europe “is still probably going to get worse before it gets better” because of its currency misalignment, he added.
Spain and Italy are still under a lot of pressure, despite Europe’s leaders agreeing to a massive bailout package for the countries.
“It will be a relatively slow process,” he said, adding that Taiwan would experience downward pressure from the European market.
Jorgenson, 79, who is a professor of economics at Harvard University, delivered a speech titled “The Rise of Asia and the New World Order” at the institution.
He said world economic growth is expected to accelerate soon, mainly owing to the rise of China and India.
In terms of purchasing power parity, China by 2020 will overtake the US, which has been the world’s leading economy for a century, he said.
Meanwhile, India is likely to overtake Japan to become the third-largest economy in the world, followed by Germany, Russia, Brazil and the UK, he said.