Taiwan's economic growth is expected to climb steadily to 4.25 percent next year from 3.83 percent this year, driven by stronger demand as the global economy recovers, according to a report released by the Academia Sinica yesterday.
While domestic consumption made the largest contribution to economic growth this year, the export sector, which will grow by 9.87 percent from this year, will be the main growth engine next year, said Wu Chung-shu (
The impact of rising oil prices, which was given as the reason for this year's lackluster economic performance, will be reduced next year as countries are braced for it, Wu said.
Because oil prices are expected to fluctuate around their current level, the US Federal Reserve may suspend its policy of hiking its benchmark interest rates, a move that will gradually fuel global economic growth, he said.
The nation's export sector has shown signs of weakening as local manufacturers exported increasing volumes of goods from their factories in China, which also contributed to a shrinking trade surplus.
The Ministry of Finance yesterday reported that the national trade surplus reached US$4.87 billion for the first 11 months of the year, a drop of 32.7 percent from the same period last year.
Nonetheless, the nation's export activities are in line with the world economy, Wu said.
The value of imports increased as a result of the high oil prices, which dragged the trade surplus down further, he added.
Taiwan's domestic consumption and investment are expected to dwindle slightly next year due to the minimum tax scheme that is expected to take effect next year, Wu said.
The legislature last month passed the first reading of the tax scheme, which proposes a tax rate of 10 percent to 12 percent for businesses with annual profits exceeding NT$2 million (US$59,700) after government subsidies have been taken into account, and a tax rate of 20 percent for individuals with annual earnings of more than NT$6 million, including overseas income of more than NT$1 million.
After weathering the initial stage, the positive effects of the new tax measure will emerge and benefit the economy in the second half of next year, he said.
The institute forecast that the New Taiwan dollar will slide from an average of NT$32.19 against the US dollar this year to NT$32.68 next year.
Consumer prices are estimated to grow by 1.45 percent from this year.
A possible further relaxation of restrictions on Chinese tourists will benefit the service industry and improve the nation's unemployment rate, Wu said.
It is difficult to estimate what effect relaxed tourism restrictions will have, as the government is still mulling the details, he said.
One factor that might dampen the nation's economic performance is the drawn-out political rows between the ruling and opposition parties, the institute said.
"After the elections, the parties should seek to concentrate on how to push forward major policies and measures that would benefit the economy," said Lee Yuan-tseh (
Lee, who supported President Chen Shui-bian's (陳水扁) election campaigns in 2000 and last year, said that the Democratic Progressive Party's relatively poor performance in the local elections shows people have lost faith in the government.
"I'm disappointed at the result ... a Cabinet reshuffle is unavoidable," Lee said.
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