The nation’s economy might grow just 1.67 percent this year squarely on the back of government expenditure and private investment, as exports and consumer spending have stalled, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.
The forecast is a sizeable retreat from an estimate of 2.37 percent growth made in February before the COVID-19 outbreaks became a pandemic.
“The previous forecast was guided by the SARS crisis in 2003 and therefore underestimated the ongoing pandemic, which is hitting economic activity hard at home and abroad,” DGBAS Minister Chu Tzer-ming (朱澤民) told a media briefing in Taipei.
The agency now expects exports and consumer spending to fall into the negative for the whole year, with declines of 0.7 percent and 0.12 percent, reversing projected growth of 2.85 percent and 1.58 percent respectively.
The downward revision came even though exports proved stronger in the first quarter, driven by strong demand for 5G deployment, as well as remote working and learning arrangements.
Economic activity remains tepid worldwide, although most countries have eased social distancing measures and launched aggressive stimulus programs, Chu said.
Major economies are set for a recession this year due to massive unemployment and diminished trade flows induced by shutdowns to contain the novel coronavirus, he said.
A collapse in crude oil prices has put extra pressure on goods trade, especially raw materials and base metals, which account for more than 20 percent of overall exports, he added.
A freeze in consumer spending has also made the GDP downgrade necessary, Chu said.
GDP last quarter contracted 1.58 percent, the first downturn since the 2008-2009 global financial crisis and deeper than the 1.14 percent retreat during the SARS outbreak in 2003, despite an 8.18 percent increase in new vehicle sales and a 12.39 percent increase in e-commerce sales, he said.
Altogether, the pandemic is expected to erase 2.1 percentage points from Taiwan’s GDP growth this year, he added.
The government has come to the rescue with infrastructure improvement measures and special budgets that could bolster the economy by 0.9 percentage points, Chu said.
The government and state-run enterprises would also contribute to capital formation that is projected to rise 1.02 percent this year, the agency said, up slightly from a 0.96 percent pickup it had previously predicted.
Private investment might grow only 2.31 percent this year, 0.79 percentage points less than previously forecast, as some firms are expected to wait until the virus crisis stabilizes, it added.
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