Economy to grow 6.05% in 2000

Taiwan's economic growth rate next year will be 6.05 percent, the Chung-hua Institution for Economic Research (CIER, 中華經濟研究院) announced yesterday.

Their report, "Year 2000 Economic Outlook Conference," also shows that Taiwan's private consumption will be 5.82 percent and private investment will be 10.96 percent.

In terms of the financial markets, "Taiwan has recovered fully from the 1997 Asia crisis, and financial capital will again flow to Asia and resume the level reached before the crisis," said Chen. "The average exchange rate is expected to be in the neighborhood of NT$31.31 per US$1.

The decrease in the trade surplus (after Taiwan enters the WTO) will slow the rate of NT dollar appreciation," said Chen Yenpao (陳元保), director of the center for economic forecasting."The institute report is fairly optimistic about the global economic outlook.

"Internationally speaking, if the US has an economic growth rate above 3 percent and if Japan's economic growth rate is between 1.5 percent to 2 percent, that will be enough to support Taiwan's growth next year." Chen said.

When Shieh Sen-zhong (謝森中), former governor of the Central Bank of Taiwan (中央銀行) and the chairman of the CIER were questioned about the possible US bubble economy (泡沫經濟), they replied that there is no need to worry.

"The high-technology companies in the US are still showing increasing rates of return," president Mai Chao-cheng (麥朝成) said.

"Labor productivity has increased, and the unemployment rate is at a thirty-year low," said Du Chiao-shia (杜巧霞), researcher at the institute. "There is no inflationary pressure, as demonstrated by the fact that although the FED has raise interest rates three times since September, investment has not been decreasing."

However, if the US and Japanese economies slow, "our export-driven economy will be hurt due to an estimated decrease in exports of NT$24 billion, and the economic growth rate will be reduced to 5.31 percent [less than this year's 5.37 percent]," Chen said.

Another area of concern is the potential for Y2K related damage. According to worst case scenerio data from the Council for Economic Planning and Development (CEPD, 經建會), if the Y2K problem hits hard, the international economic growth rate will drop by 1.9 percent and the inflation rate will increase by 1.2 percent.

However, another positive factor for Taiwan on the international landscape is that the trading relationship between China and Taiwan is expected to strengthen as a result of Chinese WTO accession.

"The industrial division of labor and industrial cooperation will be more sophisticated and government regulations will gradually be abolished," said Fu Feng-cheng (傅豐誠), research fellow at the institute, referring to an expected relaxation in the governments "No Haste, Be Patient" policy of investment in China.

"For example, Taiwan's manufacturing industry will go back to their original pattern of utilizing cheap labor and land for producing PCs and export the products directly from China. Trade volume between China and Taiwan will also increase," said Fu. "Without customs duties, Taiwan's cars can be sold directly to China without the need to build a factory there.

Domestically, "the speed of (earthquake) reconstruction, the uptick in private investment, and the improved performance in traditional industries' are the three deciding factors," said Chen.