Fri, Nov 07, 2008 page12

• Experts divided on crisis impact

  GLOOM BNP’s global head of economics said weak US demand would hurt exporters such as Taiwan and forecast that the NT dollar would depreciate before strengthening

  • By Crystal Hsu / STAFF REPORTER
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  Economists at home and abroad had different takes yesterday on the impact of the credit crisis on Taiwan, with a Taipei-based think tank putting the GDP growth forecast for next year at 4.08 percent, while a top French bank lowered the figure to 2 percent.

  The Taiwan Institute of Economic Research (TIER, 台經院) put the GDP growth projection for next year at 4.11 percent, higher than 4.08 percent forecast for this year, on bigger public and private investment spending that is expected to replace exports as the main economic driver.

  But BNP Paribas, France’s largest financial service provider, sketched a gloomier picture, saying the raging financial storm will hurt manufacturers worldwide and restrict Taiwan’s GDP growth to 2 percent next year.

  TIER president David Hong (洪德生) said the nation may post an economic growth rate of 4.08 percent next year even though the full impact of the financial storm is yet to be assessed.

  “It remains to be seen when the financial storm will end,” Hong told a news conference. “But we expect the [domestic] economy will start a slow but steady recovery in the second half of next year when the impact of a number of public works projects will be felt.”

  The government has proposed increasing its investment expenditure for next year to 17.67 percent, from 10.07 percent this year, Hong noted, adding that private sectors will follow suit and boost their investment spending to 6.54 percent from a negative growth this year.

  “Private investment, rather than exports, will fuel the dynamism for economic upturn,” Hong said. “Greater investment will ease unemployment and encourage private consumption that will grow to 1.63 percent next year.”

  Exports, the mainstay of the nation’s GDP upturn in recent years, are expected to decline to 4.4 percent next year, from a projected 5.6 percent this year, the economist said, attributing the downshift to falling demand from trade partners across the world.

  Hong said inflation will pose no threat next year when crude oil is expected to cost an average of US$60 a barrel.

  Paul Mortimer-Lee, a London-based global head of market economics for BNP failed to share the optimism.

  Mortimer-Lee told a separate press briefing global manufacturing will suffer because of weakening US demand.

  “The crisis is bad, really bad,” he said. “Weak US demand will hurt exporters including Taiwan, in light of its export-oriented economy.”

  Mortimer-Lee said the nation may achieve a GDP growth of 2 percent next year and raise the number to 4.7 percent in 2010.

  As investors tend to move their capital home, the economist predicted the demand for the US dollar will remain strong in the near future with the New Taiwan dollar trading at an average of NT$34 against the greenback for the rest of this year.

  He expected the local currency to depreciate to NT$35 in the first quarter of next year and strengthen to NT$33.5 at the end of next year.

  Mortimer-Lee voiced concern the rate cuts by the Federal Reserve and other central banks may lead to deflation or a repeat of tough inflation.

  “We’re having a financial crisis never seen since World War II,” he said. “No one can tell where the bottom is … Unemployment will go up and earnings down.”
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