Academia Sinica figures deepen economic gloom

The China Post staff

Another economic research institution yesterday sounded grave warnings for the Taiwan economy. The Institute of Economics of Academia Sinica forecast Taiwan’s gross domestic product (GDP) will grow a mere 2.38 percent for 2001, sharply down from its previous forecast of 5.21 percent issued earlier this year. The 2.38 percent growth rate would also be the lowest level since 1975 when the Taiwan economy was hard hit by a global energy crisis.

Economists at the Academia Sinica, the nation’s highest academic institution, expressed hope that the Taiwan economy will gradually regain strength following the international recovery in the second half of the year. They expect Taiwan’s GNP growth will return to the 5 percent level in the final quarter of the year. But the economists also stressed that the actual pace of Taiwan’s recovery will still hinge on the revival of the U.S. and international economic situations. Taiwan’s domestic political stability, the progress of the ongoing public construction projects, and the island’s relations with mainland China will also affect Taiwan’s economic performance for 2001. Legislator Lai Shyh-bao of the New Party feared that the Institute of Economics may have been too optimistic and is very likely to readjust downward its economic forecasts again soon. The Cabinet’s Directorate General of Budget, Accounting & Statistics has put Taiwan’s first-quarter GNP growth rate at only 1.06 percent. Lai said some researchers predicted that the performance for the second quarter could be even worse than initial forecasts, with economic expansion at less than one percent, while pessimists even see zero growth or a negative growth rate. When presenting their forecasts, researchers of the Institute of Economics noted that Taiwan’s exports and domestic demand performed worse than expected in the first half of this year mainly due to faster- and steeper-than-expected global economic slowdown as well as continued domestic economic and political instability.

They pointed out that the U.S.-based Wharton Econometric Forecasting Association (WEFA) has already adjusted downward its forecast of the global economic growth rate from 3.8 percent to 2.6 percent for the second quarter and the U.S. growth rate from 3.6 percent to 1.7 percent.

The economists predict that Taiwan’s merchandise and service exports could register a rare negative growth of 3.98 percent for 2001, while imports could even decline 7.66 percent from the 2000 level.

On the domestic front, the institute predicted that private consumer spending would grow only 2.95 percent in real terms this year, while private investments could even decline 11.42 percent, with annual government consumption also shrinking 2.28 percent from the level of last year.

Although the Taiwan currency has depreciated tremendously against the greenback, the domestic wholesale price index is expected to remain relatively stable, dropping 0.28 percent. Concerning the consumer price index, the institute forecast a marginal 0.56 percent increase in view of gradually stabilizing international crude oil prices and sluggish domestic demand.

The institute also forecast a meager 0.79 percent rise in M1B money supply and a 5.92 percent growth in M2 money supply.

It forecast the island’s Q2 growth rate at 0.73 percent, the lowest quarterly growth since 1974.