The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday cut its forecast for GDP growth for this year to 3.04 percent, down from the 3.56 percent it projected in April, as a global economic slowdown, especially in China, affects exports.
However, academics who joined the discussion challenged the institution’s new forecast, saying it would be difficult — if not impossible — for the economy to expand 3 percent this year and the government should focus its resources on improving domestic demand.
Exports, which drove more than 70 percent of GDP growth in the first quarter, are predicted to grow 3.88 percent this year, sharply down from a prior estimate of 6.26 percent growth, the CIER report showed.
Photo: CNA
“The second half may put up a weaker performance compared with the first half owing to a higher base,” CIER researcher Peng Su-ling (彭素玲) told a media briefing.
GDP growth likely reached 3.11 percent in the first half of the year, but could decelerate to 2.97 percent for the rest of the year, with major economies proving to be weaker than expected, Peng said.
Slowing global growth is unfavorable to Taiwanese exports, which contracted 7.1 percent in the first half, the report said.
Taiwanese exports to major trading partners, notably China and Southeast Asian nations, are declining, while South Korea is gaining market share, the report said.
The trend suggests declining competitiveness among local exporters, Peng said.
To make things worse, China is reducing its dependence on imports of electronic components from Taiwan, as it builds up its own supply chain as part of its economic restructuring, Peng said.
On the currency front, the New Taiwan dollar has risen 2.67 percent versus the US dollar so far this year, while the yen and the won have retreated 1.89 percent and 1.5 percent respectively over the same period, Peng said.
A strong NT dollar is eroding exporters’ bottom lines, he said.
Government agencies are looking for ways to boost the nation’s exports and the economy as a whole, with some academics suggesting establishing a sovereign wealth fund to help finance social welfare spending and others calling for the establishment of a more investment-friendly environment.
Bills Finance Association (票券公會) chairman Hermann Wu (吳正慶) said that he and his peers doubt the economy can grow by 3 percent this year.
National Central University economics professor Chiou Jiunn-rong (邱俊榮) suggested that the government focus its efforts on strengthening domestic demand to support economic growth.
However, he added that the government gives too much importance to GDP figures.
“GDP growth may not improve or reflect the well-being of the public the way a wage increase does,” Chiou said.
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