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TAIEX plummets as Academia Sinica cuts GDP forecasts

The nation's main stock index fell to yet another new low yesterday after a major government think tank halved its economic growth forecast for this year to 2.4 percent.

The TAIEX dropped 3.2 percent to a seven-and-a-half-year low, finishing the day down 147.86 points at 4,485.68. Turnover was NT$59.31 billion.

Academia Sinica (中研院) yesterday slashed its growth estimate for the year from the 5.2 percent it predicted in December to 2.4 percent.

In the second quarter the economy probably grew 0.7 percent from a year earlier -- down from 1.1 percent in the first quarter, it said. The group expects growth to accelerate to 2.5 percent this quarter and 5.1 percent in the final quarter.

Economists and government agencies have been cutting their growth estimates for Taiwan as overseas sales of computer chips, mobile phones and other technology goods fall. Exports -- which make up about half of the nation's economy -- have fallen for four straight months and slumped 16.6 percent in June from a year ago.

"The global economy is slowing at a faster-than-expected pace," the institute said in a statement.

The Ministry of Finance said earlier this month exports will probably shrink at least 9 percent this year after growing 22 percent last year, mainly because of falling orders from the US, Taiwan's biggest market.

Slumping overseas sales aren't the only drain on Taiwan's economy. The research institute also cited political bickering between the ruling DPP and the opposition KMT over issues including the construction of the Fourth Nuclear Power Plant, restrictions on investment in China and a proposal to shorten the workweek.

The institute also said mounting bad loans and slowing investment and government spending are hindering economic growth. Past-due loans at Taiwan banks now make up 9 percent of the total, according to Minister of Finance Yen Ching-chang (顏慶章).

Academia Sinica's 2.4 percent growth forecast for this year compares with the government's official 4 percent target. Last year, Taiwan's economy expanded 6 percent.
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