The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday slashed its economic growth forecast for this year to 0.9 percent, from the 3.04 percent it predicted in July, as exports and other economic bellwethers fare weaker than expected amid a global slowdown.
The sluggish growth might persist if major global technology firms continue to deplete their inventories and shy away from buying Taiwan-made electronics and components, economists and officials said.
“The nation’s export-oriented economy is not expected to grow by more than 1 percent this year, as global trade stalls and China cuts its dependence on imports,” CIER president Wu Chung-shu (吳中書) told a media briefing.
Photo: Wang Meng-lun, Taipei Times
Exports make up 60 percent of GDP, with 40 percent going to China, where manufacturers of semiconductors, flat-panel displays, PCs, smartphones and critical electronic components have increasingly turned from being partners to competitors.
The Taipei-based think tank estimated that GDP contracted by 2.11 percent last quarter from a year earlier, as exports plunged 13.82 percent during the July-to-September period.
It expects the economy to resume a mild growth of 1.57 percent this quarter, with full-year growth edging up 0.9 percent.
CIER’s third-quarter and full-year forecasts are worse than the Directorate-General of Budget, Accounting and Statistics’ (DGBAS) projections made in August, of 0.1 percent and 1.56 percent growth respectively. The DGBAS is due to release third-quarter results and update full-year figures on Oct. 30.
DGBAS statistics director Tsai Hung-kun (蔡鴻坤) said that the economy has very likely slipped into a technical recession, defined as two consecutive quarters of negative economic growth on a seasonally adjusted quarter-on-quarter basis, as used in the US and Europe.
However, Taiwan measures economic performance based on comparisons with figures from a year earlier, Tsai said..
That means the economy is in a state of slowdown, as it is likely to improve this quarter, aided by the Thanksgiving and Christmas holidays, a peak season of sales for electronic devices in the West, Tsai said.
Private consumption is forecast to increase 2.75 percent year-on-year this year, strong enough to keep GDP in positive territory, CIER researcher Peng Su-ling (彭素玲) said.
The New Taiwan dollar, which depreciated 7.16 percent against the US dollar last quarter, failed to spur demand, but might allow exporters to book foreign exchange gains, the report said.
“Currency depreciation cannot boost export competitiveness if trade rivals do the same,” Wu said.
The South Korean won has weakened 3.59 percent against the greenback so far this year, steeper than the NT dollar’s 2.29 percent drop over the same period, the report said.
Meanwhile, the Singaporean dollar fell 4.8 percent and the yuan retreated 1.98 percent versus the US currency this year.
Consumer prices are forecast to contract 0.46 percent this year and climb 1.03 percent next year, when oil price disruptions are expected to taper off, CIER said.
The economy is expected to expand 2.27 percent next year, as technology firms indicated that inventory adjustment might come to an end this quarter, suggesting an improvement thereafter, the report said.
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