Despite growing public concern over food contamination by the chemical di(2-ethylhexyl) phthalate, or DEHP, economists said its impact on the domestic economy would be limited.
The local beverage industry is relatively small in scale and consumers’ continued purchases of “safe” drinks like fresh juice or sodas are two major factors that would lower the incident’s negative impact, they said.
Kevin Hsiao (蕭正義), director of UBS Wealth Management Research in Taiwan, said consensus estimates on potential losses range from NT$300 million (US$10.45 million) to NT$1 billion, mainly in the private consumption sector.
“Compared with the government’s latest forecast that Taiwan’s GDP would reach NT$14.93 trillion, the estimated loss [from the food scare] would be fairly limited,” Hsiao said by telephone.
Based on government data, the food and beverage industry accounts for a mere 4 percent of domestic manufacturing output, which contributes about one-fourth of the nation’s GDP.
Hsiao added that the incident was unlikely to develop into wide-scale panic over the safety of the food and beverage industry as a whole, with most people simply choosing to avoid drinks and health food that they think are at risk.
Gordon Sun (孫明德), deputy director of the Taiwan Institute of Economic Research’s (台灣經濟研究院) macroeconomic forecasting center, agreed.
He said most consumers continue to buy drinks, which should benefit companies offering drinks that are not at risk of contamination.
“For fresh juice and soda suppliers, their short-term revenues may surge and that will create a substitution effect to help counterbalance the negative sentiment,” Sun said by telephone.
To ensure that the incident does not spread further and affect the tourism business, the government should speed up its investigation of drink stands in night markets as “eating in night markets” has become a “must” for foreigners visiting Taiwan, Sun said.
However, Wang Lee-rong (王儷容), director of the center for economic forecasting at the Chung-hua Institution for Economic Research (中華經濟研究院), said Taiwan’s economy would still be influenced negatively in the short term because of losses in domestic consumption and exports.
“The contamination scare may not only affect local consumer confidence, but also decrease demand from other countries for [Taiwanese] beverage products, thus driving down export figures,” Wang said.
The negative impact on Taiwan’s economic growth would be felt in the third quarter, she said.
The government’s latest forecast on May 19 showed that GDP would grow 4.02 percent in the third quarter, with full-year growth forecast at 5.06 percent.
The Directorate-General of Budget, Accounting and Statistics (DGBAS) will release its updated forecast at the end of next month.
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