If the war in Iraq lasts longer than six weeks, the nation's gross domestic product for this year may fall to below 2 percent, economists said yesterday.
"If the war lasts between six weeks to three months, this year's domestic GDP may decline from the previous forecast of 3.6 percent to 2 percent," Chou Ji (
The longer the war, the greater possibility that oil wells in Iraq will be destroyed, which would bring about a global economic fallout triggered by rising oil prices, Chou said.
The figures are part of the institute's analysis of the nation's economic outlook for this year, taking into considerations various scenarios. The results have been sent to the Cabinet-level Council of Economic Planning and Development, he said.
If the war lasts longer than three months, Chou said that the nation's GDP may plummet to 0.3 percent.
Should the Iraq war end quickly, the economy will be spared, the government-funded think tank said.
"If the war ends within six weeks, the GDP may grow by 0.1 percent to reach 3.7 percent," Chou said.
US President George Bush yesterday said that he hoped to end the Iraqi war within one month. If that is the case and oil prices reasonably level out, the US and world economy may perform better than expected, another economist said yesterday.
"If the war ends within one month, estimates of 3.5 percent GDP growth may be further raised," said Wu Rong-I (吳榮義), president of the Taiwan Institute of Economic Research (台經院) at a press conference yesterday.
Wu did not elaborate on the likely economic fallout if the war lasts longer than expected, only saying that "it's unlikely the war will last longer than six months."
"The war's impact on Taiwan will not be as severe as that in the 1991 Gulf War," he said.
Wu said that it's still too early to tell whether post-war reconstruction may boost demand and stimulate the global economy.
When asked whether Taiwanese businessmen in China will be negatively impacted by a shortage of oil supplies from the Middle East, Wu said that it was possible.
He urged the government to come up with contingency plans to help Taiwanese businessmen based in China deal with potential raw material price hikes if China -- the third biggest oil importer from the Middle East -- should fail to secure sufficient oil supplies.
Wu said that polled manufacturers expressed short-term pessimism toward the nation's economic performance because of pre-war uncertainties.
The survey also found that 40.5 percent of polled manufacturers expressed confidence in the nation's economic performance in the next six months based on plans to boost private investment.
"New investments from the private sector may amount to NT$1.28 trillion this year," rethe the survey said.
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