Posted on 16 Jul 2013
Academia Sinica, the top research institution in Taiwan, has lowered its forecast for the country's gross domestic product (GDP) growth in 2013 because of sluggish global demand in the first half of the year.
Academia Sinica cut its GDP growth forecast on Tuesday to 2.35 percent as weakness in demand hurt the country's exports and imports in the months following December 2012, when the institution made its previous estimate of 3.05 percent growth.
The anemic growth in Taiwan and around the world have led many domestic institutes and think tanks to cut their growth projections for Taiwan's economy in the last two months.
Academia Sinica's forecast came in as the second lowest, behind only the 2.14 percent growth estimated by the Taipei-based Taiwan Research Institute in mid-June. T
aiwan's official statistics bureau pegged the country's growth this year at 2.4 percent in its most recent forecast in late May. Ray Chou, a research fellow at Academia Sinica, predicted that Taiwan's economic growth will recover at only a slow pace amid high global economic uncertainty.
"The country's economy has bottomed out, but at a rather slow pace," Chou said at a press briefing in Taipei. If, however, global demand continues to stagnate or even deteriorate, Taiwan's full-year economic growth rate could fall as low as 1.13 percent, Chou warned. "But it will only happen if China and Europe's economies worsen and the U.S. Federal Reserve phases out quantitative easing earlier than expected," he added.
Despite the uncertainties, Chou still expressed optimism that Taiwan's economy will perform better in the second half of the year than it did in the first six months, citing improving leading economic indicators.
According to Academia Sinica's forecast, Taiwan's GDP growth will be 1.67 percent, 2.62 percent, 2.41 percent and 2.66 percent in the first, second, third and fourth quarters of the year, respectively.
The institution predicted that private consumption will be held back by stagnant real wage growth and declining consumer confidence and lowered its forecast for consumption growth to 1.26 percent for the year, down from its previous projection of 1.34 percent.
Taiwan's fixed capital formation, however, will grow 4.49 percent, higher than the 3.35 percent the institution forecast previously, on expectations of more Chinese investment fueled by the Economic Cooperation Framework Agreement. In 2013, Taiwan's merchandise and services exports and imports are expected to grow 4.93 percent and 5.17 percent, respectively, from their 2012 levels, Academia Sinica said.
The picture was not nearly as rosy in the first half of the year, when exports rose only 2.4 percent year-on-year to US$150.48 billion, and imports were up 0.3 percent to US$135.88 billion, causing local think tanks to reassess their growth projections. The institution estimated inflation will reach 1.24 percent in 2013, down from 1.93 percent in 2012.
