The Directorate-General of Budget, Accounting and Statistics (DGBAS) yesterday revised downward its GDP growth forecast for this year to 1.05 percent from the 1.66 percent it estimated last month, due to weaker-than-expected momentum in the second half of the year.
It was the ninth straight time the agency has revised downward its forecast for this year’s GDP growth since August last year, when it forecast a 4.58 percent growth rate.
The opposition reacted by saying that a Cabinet reshuffle was now a necessity.
“Despite the nation’s GDP growth continuing an upturn trend, its growth momentum is limited and lagging,” DGBAS section chief Jasmine Mei (梅家瑗) told a press conference.
The economy has been in a stateof “anemic growth” or “tepid recovery,” Mei said, echoing terms the IMF and the World Bank used earlier this year to describe global economic conditions.
The downward revision came as the economy was expected to expand by 1.02 percent in the third quarter year-on-year, lower than the 1.99 percent growth estimated in August, and was expected to increase 2.83 percent in the fourth quarter, less than the August forecast of 4.23 percent, DGBAS section chief Joshua Gau (高志祥) said, citing continuously slowing global economy and lower-than-expected growth in domestic consumption.
The economy contracted by 0.18 percent in the second quarter from a year earlier, DGBAS data showed.
As the government now projects the economy to grow by 2.83 percent in the fourth quarter, it implies that the government may not be able to raise the minimum monthly wage in the first half of next year, since the Cabinet said in September the move could only take effect if GDP grows by more than 3 percent for two quarters in a row, or the unemployment rate drops below 4 percent for two consecutive months.
However, the DGBAS maintained its forecast of an annual increase of 1.93 percent in the consumer price index (CPI) and that might be good news for Minister of Economic Affairs Shih Yen-shiang (施顏祥), who said in April that he would step down from his post if the headline inflation rate moves above 2 percent this year.
For next year, Gau said GDP may expand by 3.09 percent, down from the 3.67 percent growth previously forecast by DGBAS, while the CPI is expected to increase 1.25 percent.
Executive Yuan spokesperson Cheng Li-wun (鄭麗文) said the Cabinet remains cautious in its optimism about the overall economic outlook next year.
The issue was brought up in a regular policy discussion meeting at the Cabinet after the DGBAS reduced its forecast, Cheng said.
During the discussion, Minister Without Portfolio Kuan Chung-ming (管中閔) suggested the DGBAS review the possibility of calculating GDP on a quarterly basis, which she said was “a more professional way” to assess economic performance, rather than on an annual basis, as is currently done, Cheng said.
Because the economy is recovering gradually, quarter-on-quarter GDP would better reflect the recovery than year-on-year GDP, she said.
Howwever, the Democratic Progressive Party called for a Cabinet reshuffle.
“The ninth straight cut showed that Ma’s pledge of an improving economy within a month has failed and Taiwan’s economy is going in a downward spiral,” DPP spokesperson Lin Chun-hsien (林俊憲) said.
The Cabinet’s “Economic Power-up Plan” is not working, as GDP growth ranked last among the Four Asian Tigers and the nation has the highest unemployment rate for the four, DPP Chairman Su Tseng-chang (蘇貞昌) said at the party’s Central Standing Committee meeting.
Sydney-based Moody’s Analytics associate economist Katrina Ell said in a note that the disappointing growth in the third quarter indicated exports and production had improved, but remain weak, keeping domestic demand soft.
Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered Bank, said the latest data should provide comfort to monetary policymakers that the economiy has bottomed out in the first half of this year and is likely to stage a modest rebound into the first half of next year. He added that the central bank might keep the policy rate unchanged at 1.875 percent during next board meeting scheduled for next month, considering the high inflation is expected.
Additional reporting by Shih Hsiu-chuan and Chris Wang