Thu, Jul 24, 2003 - Page 1 News List

Academia Sinica pessimistic on growth

By Joyce Huang  /  STAFF REPORTER

Academia Sinica yesterday revised downward its economic growth forecast for this year to 2.65 percent from the 3.31 percent predicted in December, citing the impact of SARS in the second quarter.

The forecast is in stark contrast to a prediction made by the Taiwan Institute of Economic Research (TIER, 台經院) on Tuesday.

TIER predicted the economy would grow 3.53 percent this year, while the Chung-hua Institution for Economic Research (中經院) last Friday forecast economic growth at 3.02 percent for the year.

Wu Chung-shu (吳中書), a research fellow of the Institute of Economics at Academia Sinica, said that he thought the SARS outbreak had knocked 1 percentage point off growth in the second quarter.

The impact of SARS was likely to result in consumer spending, which makes up around 60 percent of the nation's economy, contracting by 1.57 percentage points in the second quarter, a fall not seen since 1961, Wu said.

For the full year, consumer spending is expected to grow a modest 1.22 percent, he added.

Similarly, private investment, which Wu argued is the driving force behind the nation's future economic growth, slowed in the first half of the year and is expected to fall 1.54 percent for the full year.

Wu, however, shared the optimism of other think tanks, saying economic recovery over the next six months is foreseeable.

Consumer confidence has already rebounded, as shown by the TAIEX's 1,000-point gain in the past two months.

"The worst is over, although the momentum for the economy to rebound in the second half of the year may not be as strong as expected," Wu said.

SARS is expected to have limited impact on the nation's trade. Growth for this year's exports and imports is expected at 6.82 percent and 5.83 percent, respectively, the institute said.

However, economic uncertainties regarding the strength of a pick-up in the global economy, a possible recurrence of SARS in the winter, government spending plans and the upcoming presidential campaign still loom and may affect economic performance in the next six months, Wu said.

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