TAIPEI: The Taiwan Institute of Economic Research (TIER) yesterday cut its forecast for GDP growth this year to 3.11 percent, from the 3.7 percent it projected in April, as global headwinds sap exports, and businesses and consumers turn cautious about spending.
There is little the government can do to reverse the economic slowdown except to weaken the local currency to stimulate foreign interest in Taiwanese exports, the Taipei-based institute said.
“We expect exports to decline 1.81 percent this year, despite a modest recovery in the second half,” TIER economist Gordon Sun said.
Sun attributed the improvement mainly to easing crude oil prices from this quarter onward, rather than the launch of new-generation technology devices, including Apple Inc’s iPhone 6s in the fall.
Global crude prices have mostly stabilized, giving companies more incentives to place orders and rebuild inventory, Sun said.
Many companies have put off purchases of raw materials and other commodities for fear of further price falls, the economist said.
“A weak New Taiwan dollar may help end the delay,” Sun said, adding that Japan and Europe have sought to revitalize their economies through drastic monetary easing, so their products and services may be cheaper and more competitive on the international stage.
Taiwan does not need to print money or cut interest rates, but it can benefit from a softer currency, the economist said.
The nation has yet to see the benefits of cheaper fuel prices in light of lackluster retail sales and private investment, bucking general expectations that businesses and consumers will spend more using savings from lower energy costs, Sun said.
TIER expects the local currency to trade at an average of NT$31.34 against the US dollar this quarter and NT$31.43 next quarter, compared with NT$30.99 last quarter, its report said.
The NT dollar has shed 1.5 percent this month after exports slumped a surprising 13.9 percent last month, central bank data showed.
The Cabinet is consulting different sectors for advice on how to revive exports and the economy as a whole.
TIER president Jeff Lin said there is no quick fix other than more favorable foreign exchange rates.
While effective, fiscal stimulus measures would take time because they need approval from the legislature and lawmakers would frown on government debt increase, Lin said.
Local manufacturers should seek to tap business opportunities linked to the Internet of Things and those that generate high added value, Lin said.
Reliance on production of thin-margin devices has proved unsustainable and unprofitable, he said.
