Although an economic contraction is being anticipated for this year, the local economy will likely see a “sharp rebound” next year with GDP growth of between 2.3 percent and 2.8 percent, Standard & Poor’s Asia-Pacific chief economist Subir Gokarn told a teleconference yesterday.
S&P said that the local economy likely expanded by between 2 percent and 2.5 percent last year, much lower than the 5.7 percent growth of 2007.
It added that it expected the economy to contract by 1 percent or a worst-case scenario of 2 percent this year because of an export slump.
That would lump Taiwan and South Korea together as the fourth worst-performing economies in Asia. S&P forecast that Singapore would contract by about 3 percent this year, while Japan and Hong Kong would shrink some 2 percent. GDP in Taiwan and South Korea is expected to fall by roughly 0.7 percent.
“Collapsing exports are leading to a sharp reduction in growth,” the Mumbai-based economist said in his report. “Supportive monetary policy in the wake of rapidly falling inflation will provide some help, in tandem with fiscal policy, but growth is nonetheless expected to be negative.”
“In 2009, further headwinds are in store,” Gokarn added.
As a result of weak global demand for high-tech products and competition from South Korea, Taiwan’s technology-reliant economy is expected to post a lower surplus in the current account this year, said the report, entitled Asia-Pacific Economic Outlook Q1 2009: Growth Slows As Global Conditions Worsen; Policy Responses Offer Hope.
However, Gokarn added that if Taiwan could export more capital goods to other affluent countries in the region while boosting government investment domestically, it would provide the local economy with significant support.
The international ratings agency said yesterday that its GDP estimates for this year were based on its baseline US scenarios of a 2 percent decline this year and positive growth of 2 percent next year, as well as forecasts for a worst-case scenario for the region, based on a worst-case scenario for the US of a 3.8 percent decline in GDP this year.
Gokarn nevertheless expressed confidence in the Chinese and Indian economies, which he said have been the two best performers in the region with relatively strong estimated growth for this year.
S&P estimated that China’s economy grew 9 percent last year, while the Indian economy grew 7.7 percent. It expects growth in China to slow to between 6.5 percent and 7 percent this year, while India’s growth could slow to between 5.8 percent and 6.3 percent.
Even in a worst-case scenario, China will have a minimum of 5.5 percent GDP growth this year, it said.
Thanks to its trade linkage with China, the Taiwanese economy should see benefits emerge gradually from its counterpart across the Strait, Gokarn said.
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