Economic growth for second quarter looks gloomy: experts

The China Post staff

Taiwan’s economic growth rate for 2001 may only reach around 3.3 percent as a top government economic planner and a private think tank both forecast growth for the second quarter at 1 percent yesterday. Lee Kao-chao, vice chairman of the Cabinet-level Council for Economic Planning and Development (CEPD) said that second quarter might remain around 1.06 percent, similar to the first quarter. The Taiwan Institute of Economic Research (TIER) yesterday also sharply revised downward the forecast for Taiwan’s second quarter growth rate to only one percent, shrinking almost three times from the earlier forecast of 3.91 percent made two months ago. TIER President Wu Rong-yi expressed surprise over the fast deterioration of the island’s economic condition. When researchers at TIER released their earlier estimates on April 25, they bullishly projected economic growth at 4.75 percent for the whole year. A breakdown put the gains from the first quarter through the fourth quarter at 3.33 percent, 3.91 percent, 5.14 percent, and 6.53 percent.

Official figures released by the Directorate General of Budget, Accounting & Statistics (DGBAS) show the actual growth rate for the first quarter at 1.06 percent. Lee said that even if the DGBAS’s more optimistic projections of 5.15 percent growth for the third quarter and 6.43 percent for the fourth quarter could be achieved, the annual growth rate for 2001 would still reach only 3.3 percent. The TIER failed to reveal its latest projection for the year’s economic growth. The CEPD was scheduled to make public major economic indicators for May this morning. But the council has postponed the announcement till 4:00 p.m. today so that there won’t be a negative impact on the stock and foreign exchange markets. Wu of the TIER said a survey for May shows that only 6.4 percent of companies think the business conditions are “good,” down from 10.1 percent in April. But those that think the situations are “bad” account for the majority of 60.1 percent, up sharply from 47.2 percent in April. Companies that feel their business conditions are “ordinary” also dropped to 33.5 percent from 42.7 percent.

According to the TIER report, the composite indicator which reflects business climate seen by manufacturing companies dropped to 89.22 points in May, down 4.93 points from the previous month.

After falling to an all-time low of 88.34 points in January, the composite indicator registered surges in February, March and April. However, as the forces of rebound failed to sustain the impact of the global economic slowdown, it receded again in May.

Meanwhile, the Central Bank of China (CBC) announced that the annual growth rate for the lending and investments by major financial institutions for May set a new record low of only 0.4 percent, down from of 1.17 percent for April. CBC officials said the figure shows that the new government’s policy of forcing banks to increase loans to enterprises has not yielded expected results. The general conservative spending by consumers and investments by companies induced more money into deposit accounts. Total deposits at all financial institutions at the end of May rose 5.47 percent from the same month of 2000 higher than the annual gain of 4.78 percent registered in April. Deposits in foreign currencies rose to an equivalent of NT$1.17 trillion as of the end of May, the second record high.