News Room - Business/Economics

Posted on 05 Feb 2009

Taiwan economy may hit the bottom in Q2: CEPD

A top economic policy planner said yesterday called a prediction Taiwan's gross domestic product may decline a whopping 11 percent this year "quite ridiculous," referring to the recent projection by Hong Kong-based brokerage house Credit Lyonnais Securities Asia-Pacific Markets.

 

Hu Chung-ying, deputy chairman of the Cabinet-level Council for Economic Planning and Development (CEPD), made the remarks in response to a CLSA report published yesterday that Taiwan and Singapore may see their economies shrink this year by 11 percent and 10 percent respectively, as Asia's export-dependent nations trade less with each other.

 

The report also noted South Korea's GDP will likely fall by about 7 percent. In a number of countries, the wheels have fallen off the primary driver of Asian growth -- exports, the CLSA report said. Intra-regional trade has slowed more aggressively than extra-regional trade.

 

Nevertheless, Hu said Taiwan's sliding economy is likely to hit bottom in the second half of this year, adding there is still a chance Taiwan could post positive GDP growth this year.

 

Hu said he wouldn't be so pessimistic as the CLSA in predicting Taiwan's economic outlook for 2009, due mainly to a spate of stimulus measures by the government, including the shopping voucher program.

 

While forecasting a GDP decline in the first quarter of the year, Hu said he expects a slow recovery to begin in the third quarter, or in a worst-case scenario, in the fourth quarter.

 

Hu said the CLSA forecast was the most pessimistic among all those made by international institutions.

 

For example, he said, the Global Insight forecast in late 2008 that Taiwan's economy will contract by 1.8 percent in 2009, while the International Monetary Fund predicted growth of 2.2 percent. The Citigroup Global Markets forecast growth of 1.5 percent, Goldman Sachs predicted negative growth of 3 percent, and the Economist projected negative growth of 2.9 percent, he added.

 

In Taiwan, the latest prediction, which came from the Taiwan Institute of Economic Research on Jan. 23, forecast the economy would grow by 0.89 percent in 2009.

 

The Directorate General of Budget, Accounting and Statistics (DGBAS) has predicted the 2009 economy would grow by 2.12 percent while the CEPD set a 2.5 percent growth rate as the national goal.

 

Meanwhile, Asia's export-driven economies are slowing as demand for their products diminishes amid recessions in the U.S., Japan and Europe. Exports account for about 32 percent of Asia's GDP, according to the World Bank.

 

Also yesterday, the International Monetary Fund slashed its 2009 growth forecast for Asia to 2.7 percent from 4.9 percent, and Managing Director Dominique Strauss-Kahn said a "worse outcome cannot be ruled out."

 

Developing Asia, which excludes Japan, Australia and New Zealand, will probably expand 5.5 percent this year, the slowest pace since 1998, the IMF said in an update of its World Economic Outlook report last week.

 

China will expand 5.5 percent this year, while India's economy will grow 5 percent, CLSA said.

 

Hong Kong, Malaysia and Thailand will see GDP contractions of 5 percent this year, while the Philippines and Indonesia will expand less than 1 percent in the same period, the report said.