On Aug. 17, Taiwan cut its annual gross domestic product (GDP) growth forecast for 2012 to 1.66 percent, down from the previous estimate of 2.08 percent in late July.
It marks the eighth consecutive time the projection has been adjusted downward since last August, when the first 2012 GDP growth estimate was made at 4.58 percent.
Officials from the Directorate General of Budget, Accounting and Statistics, the government agency that made the economic projection, attribute the adjustment to a weakening global economy and plummeting exports of the export-dependent country.
Exports for July fell by 11.6 percent, a scale that was "worse than expected," said the officials.
The following are excerpts of local newspaper reports on comments by several economists on the economic growth situation:
Amid economic stagnancy, Taiwan needs talent like the late pop icon Michael Jackson, who was creative and full of innovative ideas, contended Richard Koo, chief economist at the Taipei branch of the Nomura Research Institute, a leading provider of consulting services and system solutions in Japan.
Like Japan, Taiwan faces rising competitors, he said, warning that if Taiwan continues to be reluctant to adjust its economic structure, it will soon be overtaken by China.
Citing the example of the United States, with which Japan caught up in the 1970s, Koo said the U.S. spent 20 years searching for its "economic soul" before it found the strength to promote economic innovation in the 1990s, the era of network economy.
Now Taiwan must encourage its young people to constantly breed innovative ideas and create new designs, he said.
Although HTC Corp., Taiwan's leading smartphone maker, has recently encountered a bottleneck in its business development, it needs not worry about the rise of new competitors in the market as long as it keeps creating new products, said the Japan-based Taiwanese-American economist who specializes in balance sheet recessions.
Taiwanese companies should learn from Japanese digital camera brands, which have been world leaders for years, Koo said.
"It is certain that the economic performance will be ugly this year," said Polaris Research Institute President Liang Kuo-yuan when commenting on the government's latest GDP growth forecast adjustment.
He also predicted that the estimated 1.66 percent GDP growth will continue to drop closer to the 1.5 percent projected by market research firm Global Insight Aug. 17.
Taiwan's economy is really weak, the economist said, explaining that its exports have been worse than its major competitors in the global market this year.
When China and the U. S., Taiwan's key trade partners, have been moving to reform their economic structures to pump up economic growth amid the weakening global economy, Taiwan has not followed suit through adjusting its industrial manufacturing structure, he said.
The consequence will be a drop in exports by the electronic sector, one of the major driving forces of Taiwan's exports, in the third quarter of the year, a period of time that is traditionally peak season for the sector, he added. He also attributed the drop to declining demand in China.
The economist suggested that the government should increase investment in efforts to pump up the country's economic development. "It is not right that investments by state-run enterprises and the government are declining on a large scale amid a global economic slowdown."
Chiou Jiunn-rong, a professor of economics at National Central University, blamed the dropping annual GDP growth forecast to the government's wrong economic policy of viewing the Taiwan-China Economic Cooperation Framework Agreement as a "wonder-drug."
Since the trade deal took effect in September 2010, more and more Taiwanese industries have relocated to China, he said.
Moreover, China has begun to develop its own up- and mid-stream manufacturing industries, he went on, noting that increasingly, China is becoming an economic and trade competitor for Taiwan.
The government has been too optimistic toward the cross-Taiwan Strait trade deal, which it is convinced can fix many of the economic problems facing Taiwan, the scholar said.
Hsu Song-ken, a professor of industrial economics at Tamkang University, also expressed worry about the country's economic condition, predicting that GDP growth is likely to shrink to below 1 percent this year. "The government must work very hard" to keep the figure from falling, he said.
Exports are a key factor in deciding Taiwan's GDP growth, and China has become Taiwan's largest export market thanks to purchases of intermediate materials and parts and components from Taiwan by Taiwanese companies operating in China, Hsu pointed out.
However, in recent years, some of these firms have relocated to Southeast Asian countries, where labor is cheaper, amid rises in wages in China, he said, warning that a continuous drop of Taiwanese exports to China is likely.
He also projected the GDP annual growth in 2013 will not stand at 3.67 percent as the government has forecast because the global economy is not going to rebound in the short term.
It will not be easy to achieve 3 percent GDP growth next year unless the government integrates all its departments and agencies in an effort to settle the economic crisis, he said. (Aug. 18, 2012)
(By Elizabeth Hsu)