Academia Sinica forecasts 3.42% GDP growth in 2014

By John Liu, The China Post

TAIPEI, Taiwan — Academia Sinica, the nation’s top research institute, made an upward adjustment to Taiwan’s GDP growth to 3.42 percent in 2014, and predicted that Taiwan will see 3.38-percent growth in 2015. Domestic demand contributes about 60 percent of Taiwan’s economic growth, while foreign demand contributes the other 40 percent, said Ray Chou (�P�B��), a research fellow at Academia Sinica’s Institute of Economics. Academia Sinica is upbeat about Taiwan’s trade performance. Thanks to economic recovery in the U.S., Taiwan’s exports grew in the first 11 months of 2014, and Academia Sinica predicts that trades will further grow in 2015, as the New Taiwan dollar depreciates against the stronger greenback. In addition, dropping commodity and oil prices will also cut down on costs for local exporters. There are risks to Taiwan’s exports, however. Mainland China, one of Taiwan’s major export countries, has exhibited slowing economic growth. The International Monetary Fund (IMF) forecast that China will see 7.1-percent growth in 2015, the lowest in four years. The slow growth will be a ��new norm,�� which may have an adverse impact on Taiwan’s exports, said Academia Sinica. Most global forecasting agencies said that the U.S. economy will be the main driver for growth in the world economy in 2015. However, besides the U.S., Taiwan also exports to mainland China, Japan, Europe and many Southeast Asian countries. This is considered a risk to Taiwan, as many of these countries’ economies have shown signs of weakness. For example, the eurozone is experiencing low inflation, high unemployment and high debt. The IMF predicts that its economy will grow only 2.2 percent this year. Japan does not fare better. Its economy has dipped for two consecutive quarters, which can be interpreted as a ��technical recession,�� said economist Chou. Academia Sinica Positive about Local Market Private consumption grew 2.86 percent in the first three quarters of 2014. The research institute attributed this to a booming local stock market that began to climb up in mid-2012. It has resulted in a greater wealth distribution. In addition, a slight growth in real earnings has also driven up local consumption. With regard to local investments, imported capital formation rose 8.4 percent between January and November as semiconductor businesses stepped up investments and airlines acquired new fleets of planes.

In the future, low oil prices will provide incentives for airlines to purchase more planes, while the new 4G technology and growing demand for semiconductors will benefit the information and electronics sector, Academia Sinica’s report said.