The Directorate-General of Budget, Accounting and Statistics (DGBAS) yesterday trimmed its forecast for GDP growth for a third time this year, to 1.56 percent, from the 1.67 percent it predicted in May, after private consumption fared worse than expected.
Private consumption contracted by the deepest in history, by 4.98 percent, during the April-to-June period and might not recover fast enough to tip the GDP component back into growth this year, DGBAS Minister Chu Tzer-ming (朱澤民) told a media briefing.
It is expected to drop another 0.04 percent this quarter before picking up 0.71 percent next quarter, the agency’s report showed.
For the whole of this year, private consumption is forecast to shrink 1.44 percent, it said.
“The COVID-19 pandemic dealt a bigger blow to the economy, wiping out almost all tourism revenue,” Chu said.
Foreign tourists spend about US$15 billion a year in Taiwan, accounting for about 2 percent of GDP, he said.
International tourist numbers are forecast to dwindle to 1.3 million this year from more than 10 million last year, and could rise to 2 million next year, suggesting that Taiwan would extend its border controls beyond this year as COVID-19 infections spike in many parts of the world.
Taiwanese tourists, who generally spend US$20 billion on overseas trips a year, failed to make an equal contribution to the local market, Statistics Department head Tsai Yu-tai (蔡鈺泰) said.
The DGBAS did not factor in the potential impact from the government-issued Triple Stimulus Vouchers, although economic officials said they might spur NT$100 billion (US$3.39 billion) in consumer activity.
“Consumer spending has improved after the COVID-19 outbreak nearly came to a stop,” Tsai said.
However, the numbers did not reflect the aggressive revenge consumption that local media have reported.
The economy last quarter declined 0.58 percent, albeit better than the 0.73 percent retreat the agency’s advance report two weeks ago said.
Exports put up a slightly stronger performance, buoyed by demand for electronic components used in 5G deployment and remote working.
Outbound shipments are forecast to edge down 0.1 percent this year, while imports are expected to slide 1.18 percent, amid uncertainty linked to the COVID-19 pandemic and US-China trade tensions, the DGBAS said.
Capital formation and government consumption would underpin the economy, with projected increases of 4.65 percent and 2.44 percent respectively, it said.
Local semiconductor companies have bought new capital equipment to maintain their technology leadership, but the pace might slow in the second half given a high comparison base last year, Chu said.
The economy is forecast to grow 3.92 percent next year, slower than the world’s predicted 5.5 percent recovery, supported by the development of vaccines in the middle of next year to stem the spread of the novel coronavirus.
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