TAIPEI: The Taiwan Institute of Economic Research (TIER) yesterday revised downward its economic growth forecast for 2009, predicting a 1.91 percent contraction in Taiwan's real gross domestic product (GDP).

The think tank last forecast in April stated that the economy would post marginal growth of 0.11 percent for the year.

Despite the revision, TIER's forecast remains the most optimistic so far.

The latest projection by the Polaris Research Institute puts the economic decline at 4.6 percent. The Directorate General of Budget, Accounting and Statistics is predicting a 4.25 percent contraction. The Chung-Hua Institution for Economic Research anticipates a 3.56 percent decline in GDP.

The TIER explained that the revision was made in light of weak export momentum, poor performance by the service sector, a decline in intent to invest and sluggish consumption in the first half of the year.

TIER forecast a negative growth of 4.25 percent for the second quarter of 2009 but predicted growth will turn positive in the second half of the year, resulting in a 0.22 percent growth in the third quarter and 7.1 percent in the fourth quarter.

Although the government has introduced stimulus measures, such as the consumption voucher program and tax exemptions in efforts to boost the economy, Taiwan's fixed capital formation is likely to drop 15.77 percent in 2009, mainly because of a decline in demand amid the global economic downturn, the TIER said.

The institute predicted that private consumption will increase slightly by 0.37 percent, while exports will plunge by 14.38 percent.

The wholesale price index would likely decrease 7.13 percent, and the consumer price index by 0.17 percent, the institute said.

Meanwhile, a survey conducted by the TIER in June concerning the climate for the manufacturing sector shows that 39.7 percent of manufacturers expect conditions to improve over the next six months. The latest figure is more pessimistic than the 42 percent who expected conditions to improve in the May survey.

Sixteen percent of respondents predicted conditions will worsen over the next six months. That's up marginally from the 15.6 who held a gloomy outlook in June.

Meanwhile, 44.3 percent said they think conditions will remain the same, up from 42.4 percent in May.

The composite business climate indicator for the manufacturing sector stood at 114.3 in June, up 1.9 points from the previous month, the TIER report shows.

The composite business climate indicator for the service sector registered 117.75, rising 1.38 points from May.

Both indicators have risen over six consecutive months since January.

China Daily/CNA

(HK Edition 07/31/2009 page2)