Taiwan's economy is expected to grow by more than 5 percent next year due to increasing exports and rising domestic demand, reports from international economists said this week.
On Tuesday, the UK-based Economist Intelligence Unit forecast that Taiwan's GDP will grow 5.4 percent next year, up from 3.2 percent this year, while a report issued Monday from Goldman Sachs Asia Economic Research Group called for a more bullish 5.8 percent.
"A broad recovery in both domestic and external demand will result in an acceleration in the GDP growth rate to 5.4 percent in 2004," the Economist report said. "A SARS-free 2004 and stronger growth in America will help Taiwan's economy."
The same report raised the forecast for GDP growth in the US to 4 percent from a predicted 3.4 percent, due to strong economic and employment figures in the third quarter, it said.
Taiwan's strength in the technology sector and more sales to China caused Goldman Sachs to raise its forecast for GDP growth from 5.0 percent to 5.8 percent next year.
"Taiwanese exporters have been enjoying a strengthening tailwind from the global tech recovery," the report said. "A pickup in China's cyclical momentum will add more wind to the sail."
Economists said more spending locally underscores the rosier outlook.
"The feed-through from a buoyant external sector to domestic demand is starting to kick in, as evident from imports of capital goods rising 12 percent quarter on quarter in October," the Goldman Sachs report said.
rise in exports
During the first 10 months of this year, exports -- which account for half of Taiwan's economy -- rose 8.7 percent to US$116.4 billion, while imports grew 9 percent to US$101.7 billion, the Ministry of Finance reported last month. Ministry statistics call for a 9.3-percent rise in exports this year.
The international reports come as Taiwan's Council for Economic Planning and Development (CEPD) raised its own target for GDP growth to 5 percent from 4.72 percent on Tuesday.
"We feel the need to mark up the target growth as international economies showed signs of steady growth, coupled with the increase in domestic investment and the 10 new mega investment projects," a CEPD official said on Tuesday.
Last month, the government announced plans to spend NT$500 billion on infrastructure projects over the next five years.
political wild card
But one Taipei-based independent analyst said that political uncertainties could impact GDP growth next year.
"Politics is the wild card," Damian Gilhawley told the Taipei Times yesterday. "Growth could be affected by the presidential election."
Gilhawley, who compiles the monthly Taiwan Economic Review on business, economic and political developments, said the forecasts from international economists are "a bit high" and based on the assumption that domestic consumption will grow.
Private investment remains weak as most investors put their money into China, and public investment through the recently announced infrastructure projects could be stalled in the legislature, he warned.
A slowdown in economic growth in China or the US would also affect GDP growth in Taiwan next year, he said, adding that banking reforms need to continue.
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