The Economist Intelligence Unit (EIU), a leading world research body, yesterday put Taiwan’s GDP growth forecast at 1.3 percent next year, saying the nation is vulnerable to the impact of the upcoming global recession in light of its heavy dependence on foreign trade.
“As an open trading economy, Taiwan is particularly exposed to the global financial crisis,” EIU Asia-Pacific editorial director Charles Goddard said. “We have sharply revised downward our forecast for Taiwan’s GDP growth in 2009 to just 1.3 percent, the weakest performance in eight years.”
Goddard attributed the revision to the fact that the outlook for the US economy, one of Taiwan’s largest export markets, will be extremely weak and that domestic demand is unlikely to provide a significant boost.
Goddard, a co-chairman of a high-profile EIU forum in Taipei today, said the government’s focus in the short term will be tempering the effects of the global recession, chiefly through fiscal stimulus measures.
In the long run, the Chinese Nationalist Party (KMT) administration will continue to liberalize the economy and will have a fair mandate to do so given that the ruling party also controls the legislature, the Asia watcher added.
Goddard said that President Ma Ying-jeou’s (馬英九) rapprochement with China should also be able to stimulate the economy even though the progress will not be radical or swift.
“The president will have to be mindful of the persistent and significant mistrust of China among the electorate and China is unlikely to hand too many gifts without significant concessions,” Goddard said.
Echoing the theme, Steven Xu (許思濤), director of EIU advisory services in China, said emerging markets, including Taiwan, would experience falling GDP growth next year and in 2010 though it does not have the problem of stretched credit that is plaguing developed countries.
“We’re pessimistic about the global economy, which is not expected to improve much in 2010,” Xu said. “Against this backdrop, we expect Taiwan to post a GDP growth of 1.6 percent in 2010.”
The EIU predicted unemployment in Taiwan would average 4 percent this year and grow to 4.3 percent for next year and 2010. The UK-based institute put the lending rate at 1.4 percent next year but forecast it would jump to 4.6 percent in 2010.
“We believe central banks around the world will continue to lower interest rates to spur economic growth but will undo the policy later to avoid deflation,” Xu said, adding inflationary pressures would return following the rate cuts.
The economist also warned that the era of Taiwanese businesspeople profiting from the export boom in China is coming to an end now that China’s growth has become increasingly domestically driven.
“The challenge for Taiwanese businesspeople in China is whether they can benefit from its domestic expansion and what the government [here] can do to facilitate the growth,” Xu said.
The forum, titled the “Roundtable with the Government of Taiwan,” will take place today. Ma will give an opening speech before the following closed-door discussions.
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