Despite the hikes in oil prices have hurt Taiwan's economy, particularly the export sector, the Directorate General of Budget, Accounting and Statistics (DGBAS) on Thursday predicted the nation's GDP growth is likely to pick up slightly to 3.65 percent for the year, from the 3.63 percent it forecast in May. The statistics agency based its estimate on expectations of steady domestic consumption and stronger export growth momentum during the second half of the year.
It would be a relief if the impact of skyrocketing oil prices on Taiwan's economy was limited, although the bureau acknowledged that higher prices have caused slower export growth. High oil prices also substantially cut the nation's trade surplus estimate to US$2.208 billion for the year -- the lowest level since 1981, when Taiwan reported a US$1.41 billion trade surplus that year -- from the US$3.5 billion the DGBAS forecasted earlier.
But the statistics bureau's estimate surprised many economists, coming as it did against the background of a spate of downward revisions by other analysts. The Taiwan Institute of Economic Research (
There's no direct evidence that the DGBAS was trying to fudge its GDP estimate, although the government is undoubtedly under pressure to attain its 4 percent economic growth target for the year. Yet the bureau's assumptions on some of the factors that made up its forecast have raised many economists' eyebrows, and people are worried the bureau may have cast into doubt the reliability of government statistics.
For instance, examine the bureau's oil price forecast. The DGBAS appears overly optimistic in its forecast, saying the average price will be US$55.5 and US$56.4 per barrel in the third and fourth quarters, with an average price of US$51.2 for this year. Although New York oil futures prices have recently pulled back from their high of US$67.10 on Aug. 12, supply concerns persist and prices remain volatile. Last Thursday, these concerns spurred Merrill Lynch & Co to raise its estimate for average oil prices to US$56 per barrel this year.
As for the consumer price index, the DGBAS predicted that the inflation benchmark would climb to 1.97 percent this year, up from the 1.7 percent it predicted in May. Caught in a situation where the economy is slowing but inflation isn't -- mostly because of oil prices -- the government is determined to bring inflation under control by requiring state-owned power companies to absorb the cost of higher oil imports and thus keep retail fuel and power prices comparatively low. However, this measure came at the price of the government's fiscal balances deteriorating, while the private sector felt no urgency to become more energy efficient. Sooner or later, the government had to pass on more of the oil costs to the private sector, and the CPI had to rise accordingly.
That is exactly what came to pass. Taiwan Power Co (
An upward revision of the GDP forecast may be pleasant for the nation to hear, but the government is making a grave mistake if it is manipulating figures to soothe the public's concerns about oil prices and their impact on the economy.
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