TAIPEI: The Taiwan Institute of Economic Research (TIER) yesterday cut its forecast for GDP growth this year to 0.83 percent, from 3.11 percent projected in July, as private consumption failed to benefit from energy cost savings and exports falter amid a global economic slowdown.
The Taipei-based think tank expects the nation’s export-oriented economy to fare better next year with a 1.84 percent expansion, but the economy would remain tepid until after the first quarter.
“It remains unclear how much the economy might improve this quarter, after contracting 1.01 percent last quarter,” TIER economic forecasting center director Gordon Sun told a media briefing.
The economy would have difficulty expanding 1 percent this year, unless the economy sees a 0.9 percent pickup in the current quarter, Sun said, adding that the chance of that is low given headwinds at home and abroad.
The slowdown in China, the destination of 40 percent of Taiwanese exports, is weighing on growth in Taiwan and so will be worse-hit than the US, Europe and Japan, he said.
Exports to emerging markets in Southeast Asia also pan out dismal due mainly to falling oil prices, Sun said.
Minister of Finance Chang Sheng-ford earlier this week said that the decline in exports slackened last month from a year earlier, but continued at a double-digit pace.
Making the situation worse, the expected benefits from fuel cost savings failed to materialize in light of lackluster retail sales, according to an institute survey.
Instead, cheaper crude prices have driven companies and consumers to postpone spending in expectation of further falls in prices, Sun said.
The number of foreign tourists, especially those from China, may drop drastically this quarter from last quarter, with the advent of the presidential and legislative elections in January, weakening demand for hospitality and food and beverages, he said.
Oil price disruptions may not extend into next year, given the ultra-low price levels this year, he said.
Still, raw material prices top the list of concerns among local manufacturers as they move into a new year, the survey found.
Companies are also concerned about foreign exchange rates and the overall investment environment, among other things, the survey showed.
Looking forward, only 30 percent of manufacturers are feeling positive about their business prospects next year, the institute said.
About 50 percent of firms in the semiconductor and telecommunication industry are upbeat, but companies making steel and textile products hold bleak views, it said.
The institute’s GDP forecast for this year is lower than the 1.56 percent increase projected by the Directorate-General of Budget, Accounting and Statistics in August.
The statistics agency is to update its forecast on Nov. 27.
On Oct. 15, the Chung-Hua Institution for Economic Research cut its GDP growth forecast for this year to 0.9 percent from its previous estimate of 3.04 percent.
Taiwan’s economy expanded 3.77 percent last year.
Next year, the nation’s GDP is forecast to increase 1.84 percent, TIER said.