GDP growth may dip to 7-year low

Directorate General Shih Su-mei of the DGBAS released the projections at a press conference held yesterday afternoon.

She said that with poor performance in the third quarter and no improvement foreseen for the fourth quarter, the island’s economy is expected to grow only 1.87 percent this year, down remarkably from the 3.04 percent forecast in August.

The modest growth would be the lowest of its kind since 2001, when the economy posted negative growth of 2.17 percent, Shih said.

Shih predicted that the island’s GDP will experience a negative growth of 1.02 percent for the third quarter, compared with a revised gain of 4.56 percent in the second quarter.

She also predicted an even larger negative expansion of 1.73 percent for the fourth quarter, and a negative growth of 0.31 percent for the first quarter of 2009, thus pushing the economy into a recession.

“Recession” is officially defined by the International Monetary Fund (IMF) as two consecutive quarters of falling GNP.

Meanwhile, Shih said, due to acute domestic economic sluggishness caused by a global financial meltdown, consumption in the private sector declined by 1.97 percent in the third quarter and is predicted to fall by 1.86 percent in the fourth quarter.

As a result, private sector consumption is predicted to decline 0.3 percent for the whole of 2008, marking the first time the country’s private consumption will have posted negative growth.

At the same time, Shih predicted that investment in the private sector will witness an alarming negative growth of 7.83 percent for this year, with the decline in the third and fourth quarters exceeding 10 percent.

At the press conference, the DGBAS chief also noted that the island’s exports will drop 9.59 percent in 2009 after gaining 8.17 percent in 2008, and inflation will slow to 0.37 percent next year from 3.64 percent this year.

DGBAS officials also noted that if the NT$420 billion economic stimulus package fails to be implemented, then the island’s economic growth would reach only 0.53 percent in 2009.

In related news, Governor Perng Fai-nan of the Central Bank of China (CBC) yesterday told a legislative session that the U.S., Japan and European Union are very likely to suffer negative economic growth in 2009, especially in the second and third quarters.

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