Taiwan's economic growth may slow to 4.67% in 2005: TIER

Taipei, Jan. 31, 2005 (CENS)--Taiwan's annual economic growth will slow to 4.67% this year from last year's 6.17%, according to predictions issued by the Taiwan Institute of Economic Research (TIER), one of the island's leading think tanks.

TIER said cited some negative factors to the slowed economic growth, including the lackluster global economy, high-level material prices globally, the hike in interest rates, and the oversupply of information-technology products.

A survey recently conducted by the TIER showed the majority of domestic firms believed domestic economy would grow at a slow pace this year. Firms that believed domestic economy would turned for the better in the next half of the year accounted for 19.4% of the total respondents, compared to 20.2% posted in December last year; the percentage for the firms that believed the economy would remain unchanged increased to 65.3% from last month's 61.7%; the remaining 15.3% opined the economy would turn for the worse, down from 18.1%.

TIER noted the slowed economic growth would be accompanied by a slowed growth in private investments this year. The institute predicted private investments will grow only 9.67% this year, compared to last year's 25.08%.

Wu Rong-yi, president of TIER, stated private local firms will hesitate to increase investments this year for fear of the decelerated market demand and the uncertain impact of the environmental-protection Kyoto Protocol, which will take effect on Feb. 1. This is despite the fact that such massive investment projects as the fourth-stage expansion of Formosa Plastics Group's naphtha cracking complex and construction of the high-speed railway will continue.

In addition to the slowed growth in private investments, the growth of private spending and foreign trade will also decline this year. TIER forecast private spending to grow 2.58% this year, lower than last year's 3.06%, because of the expected flat expansion in domestic economy at home and abroad.

TIER anticipated the annual growth of imports and exports to drop to 14.08% and 12.1% this year from last year's 31.94% and 20.71%, respectively. Trade surplus in favor of Taiwan will be trimmed to only US$3.6 billion this year, far less than the US$6.2 billion predicted in November last year.

As the U.S. Federal Reserve is expected to hike interest rates step by step this year, TIER believed the Central Bank of China would follow suit so as to narrow the gap of the interest rates of between Taiwan and the U.S.

TIER also predicted the U.S. greenback will continue its downward trend this year because of the deficits in U.S. budget and foreign trade. The foreign exchange rate will average at NT$31.65:US$1 this year, appreciating NT$2.08 from the year earlier.