Despite rush orders and visitors from China, the country’s economy is expected to contract 4.8 percent this year, dragged down chiefly by shrinking private investment, with GDP forecast to drop more steeply in the first half, a local research body said yesterday.
Polaris Research Institute (寶華綜合經濟研究院) said the US and Europe carried greater weight on the country’s exports and that rush orders and Chinese tourists would help ease the pain of recession, but were no panacea.
“We expect GDP to decline 4.8 percent this year on falling external demand and private investment,” Liang Kuo-yuan (梁國源), president of the Taipei-based institute, told a press conference yesterday morning.
As the global financial crisis is unlikely to end this year, Liang said exports would remain sluggish, depriving the private sector of incentives to increase capital spending.
Private investment is forecast to slump 29.59 percent this year, pulling GDP down by 3.76 percentage points, topping other components, the report showed.
Net external trade (exports minus imports) is expected to drop 7.25 percent, with exports predicted to decline 10.38 percent and imports by 9.12 percent, the report said.
Liang warned against mistaking rush orders from China for electronic products as a sign of recovery, adding that the orders were not regular and they were limited.
“Let’s not forget that the global recession stems from Wall Street,” he said. “There is no chance of recovery unless the financial crisis is over. Optimism based on rush orders from China and tourism is shaky and misplaced.”
Citing domestic and global economic data, the institute said the economy would likely further deteriorate in the first and second quarters, with GDP expected to drop 9.16 percent and 8.99 percent respectively.
The government put the decline at 6.51 percent and 6.58 percent, compared with a 8.36 percent drop in the fourth quarter.
Liang said that if the global economy failed to improve next year, his forecast could be too optimistic.
“The [worst] scenario is more likely based on global indicators,” he said.
Still, Liang said the central bank would probably leave the interest rate unchanged next week, because of the rush of orders and recent rallies on the local bourse.
The top monetary regulator would likely reserve the rate cut for May after the statistics agency updates GDP growth and other economic data, Liang said.
The economist said there was little room for the local currency to weaken or strengthen in light of its current value.
The NT dollar would trade at a yearly average of NT$34.60 against its US counterpart, he said.
While forecasting that consumer prices would decline 0.97 percent, Liang dismissed deflation concerns, saying loose monetary policies worldwide would push up inflation once recovery is in sight.
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