The economy could struggle to meet a growth target of 2 percent this year in the light of poor exports, but it could achieve the target with more government expenditure, National Development Council Deputy Minister Kao Shien-quey (高仙桂) said yesterday.
“Two percent growth appears a challenge this year, as inventory issues for information technology products could continue through the first half of this year and put a drag on exports, which make up 60 percent of Taiwan’s GDP,” Kao told the Cabinet’s weekly meeting.
However, the inventory corrections could diminish in the third quarter, and would no longer be an issue, she said.
Photo courtesy of the Cabinet CNA
The government is seeking to shore up GDP growth by introducing a record budget of NT$600 billion (US$19.5 billion) for public projects this year, setting a 95 percent execution rate, Kao said.
In February, the government passed another special budget of NT$380 billion to energize private investment and consumption, she said.
Consumer spending has rebounded from its trough during the COVID-19 pandemic, seen through a fast pickup in revenue for restaurants, hotels, travel agencies and retail stores, Kao said.
The government has offered travel subsidies and rewards in a bid to encourage foreign tourists, whose spending would boost domestic demand, Kao said.
Taiwan is home to the world’s largest suppliers of electronic components — mainly chips — used in smartphones, personal computers, vehicles, big-data analysis, artificial intelligence and Internet of Things applications.
The nation’s export-oriented economy contracted 3.02 percent during the January-to-March period, and it is expected to remain soft this quarter, as a global economic slowdown has curtailed demand for nonessential goods and services amid drastic inflation and interest rate hikes, the council said.
Exports declined year-on-year for the past eight months and would not come out of the woods until the fourth quarter, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said.
The statistics agency is set to trim its growth forecast on Friday next week.
The 2 percent growth target depends on whether exports make a meaningful comeback, and inventory adjustments are a decisive factor, DGBAS Minister Chu Tzer-ming (朱澤民) told a legislative hearing.
Taiwan has little control over external demand, Chu added.
National Development Council Minister Kung Ming-hsin (龔明鑫) said the retreat in foreign trade was worse than expected.
The council’s business climate monitor signaled “blue” for the past five straight months, reflecting a recessionary state for the economy.
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