They warned that the situation could further harm industries from the semiconductor sector, which are more vulnerable to fluctuations of “strong currencies” such as the yen (Y) and the U.S. dollar (US$) and failed to diversify their markets worldwide.
Economist from Chung-hua Institution for Economic research (CIER) and HSBC securities, Taiwan, made the comments during an event held by the European Chamber of Commerce Taipei, in the context of the volatile prices of crude oil and staple commodities, which have reached new historical highs.
“We still have lots of challenges ahead,” said Wang Lee-rong, director of the Center for Economic planning at the CIER, before noting that the forecast GDP growth in 2008 is set at 4.67%, lower than the 6% President-elect Ma Ying-jeou previously planned.
“But there is still room for progress,” she added, as she described any improvement in the cross-Strait strained relationship as an important factor affecting forecast economic growth in 2008 and 2009.
On the other hand, she stressed that the projected CPI index of 3%, in the third and forth quarters of this year, and of 2.64% next year, could add inflationary pressure on the incoming government as the expected unemployment rates over the same periods could hit 3.87% and 3.82%, respectively.
“We still have lots of challenges ahead,” she continued.
Given that the real GDP growth during the last eight years was 4%, she explained that domestic demand could contribute to
However, she argued that the slow appreciation of the local currency (NT$) could also add inflationary pressure and therefore hinder the incoming government’s project of a pay raise in the public service in 2008, the first hike in almost 8 years.
Also, Wang Wanli, head of research at HSBC,
Although most Asian currencies appreciated in recent years, he noted that the Central Bank of Taiwan failed to follow such trend in order to expand the country’s exportations, which account for two-third of the total GDP growth.
He predicted that
But, he warned that manufacturers in the semiconductor industry would be more vulnerable to fluctuations of “strong currencies” such as the Japanese yen and the U.S. dollar if failed to diversify their markets worldwide.
He emphasized that the technology sector is a “global sector” affected by global markets rather than politics. Accordingly, he explained that a 1% drop of the American GDP growth would possibly lead to a 0.3% drop of Taiwan GDP growth and a 0.5% drop of Chinese GDP growth.
The
