The chief economist of Deutsche Bank AG gave a more optimistic forecast yesterday for economic recovery in Taiwan than local research institutes, based on a better-than-expected recovery in the US economy.
"My forecast for economic growth in Taiwan is 4 percent this year and 6 percent next year," Norbert Walter told the Taipei Times at a luncheon held by the European Chamber of Commerce Taipei.
The Directorate General of Budget, Accounting and Statistics (DGBAS) predicted last Friday that the economy will grow at 3.06 percent this year. Even the most bullish forecast -- from the Taiwan Institute of Economic Research -- is only 3.53 percent.
DGBAS has forecast a growth rate of 3.81 percent for next year.
The driving force will be a rebound in the technology market, Walter said.
"With sustained growth in the US, firms and consumers will buy more computer products and Taiwan, as a major supplier of components and products, will benefit from this," he said.
A Council for Economic Planning and Development official was equally upbeat when he raised his forecast for this year to above 3 percent last Tuesday.
"With business confidence having turned increasingly upbeat, the government is set to increase spending while international economies turn for the better," the council's economic research director, Hu Chung-ying (胡仲英), told reporters.
Walter also predicted a prolonged upturn in the US economy yesterday.
"It will continue long enough to support the re-election [next year] of George W. Bush," he said.
Taiwan and its Asian neighbors can not rely on Europe as a growing export market this year as economies there have stagnated, Walter said, but the enlargement of the EU next year will stimulate growth in the region.
A further stimulant will be an expected cut in the European Central Bank's interest rates next month and German tax cuts that have been moved forward from 2005 to next year, giving consumption "a shot in the arm" in the EU's largest member state and encouraging corporations to invest more, Walter said.
Tax cuts and investment are crucial to a sustained recovery in the global economy, the UK-based researcher Economist Intelligence Unit (EIU) reported at the beginning of this month.
"The global economy remains extremely weak, but performance should improve in the coming months, primarily owing to stronger consumer demand in the US as income tax cuts feed through," the report said.
"However, a sustainable pick-up in global growth will require an improvement in business investment -- without this, employment will remain weak and consumer confidence fragile," it said.
The EIU is more bearish about a recovery in the US than Walter.
"[The] EIU expects the US to weaken again later this year once the initial boost from the tax cuts fades, and only return to a trend pace of growth in the first half of 2004," the report said.
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