The government said yesterday it will boost domestic spending to ensure that the economy, bearing the brunt of falling exports, grows by at least 5 percent as projected this year.
Chen Po-chih (
Chen said yesterday that the government has already won commitment for NT$600 billion worth of domestic investment, which he said will be a "major contributor" to economic growth this year.
The Directorate General of Budget Accounting and Statistics (DGBAS), the nation's top budget office, expects Taiwan's GDP to grow by 5.4 percent this year, while most private economists have come out with lower estimates.
DGBAS recently cut its own estimate for private investment growth from 5.9 percent to 4.4 percent for this year.
To help lure investment from the private sector, Chen said the government will adopt policies on how to clear away obstacles to domestic investment.
Major projects, including the multi-billion dollar high-speed railway and the just-deregulated fixed line telecommunications market, will help boost private sector investment, Chen said.
Premier Chang Chun-hsiung (
Recent decisions by several high-tech firms, such as United Microelectronics Corp (聯電) and Formosa Plastics Corp (台塑), to cut back on capital spending have made many analysts concerned over the growth in the investment sector.
Morgan Stanley Dean Witter expects Taiwan's GDP to grow by 4 percent this year.
"We would love to revise [the estimate] upwards, but we must first see some meaningful fiscal packages brought forward by the government," said Andy Xie, Morgan's head of economic research for Asia Pacific. "But the problem with fiscal spending is that it takes time [to take affect]."
Timothy Bond, regional economist at Merrill Lynch Securities, believes that the global slowdown and weakening confidence is hurting domestic economy.
"Confidence is a driver of consumption and investment," Bond said. "And that confidence has waned over the past year."
Making the issue of infrastructure spending more complex is the ongoing dispute between the DPP and the KMT over the necessity of some infrastructure projects, analysts said. The KMT resorted to massive stimulus packages in the past to bolster GDP growth in the face of an economic slowdown.
"The KMT likes big projects," Xie said. "But the DPP is more interested in social spending."
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