Taiwan Today

The signing of a cross-strait economic cooperation framework agreement could add between 2 to 3 percentage points to Taiwan’s gross domestic product growth annually in the short term, Deutsche Bank AG’s chief economist for Asia said March 31. In an interview with the Chinese-language daily “Commercial Times,” Michael Spencer stated that in the long term, after Taiwan companies in related industries establish themselves in mainland China, such a pact could boost the island’s GDP by as much as 4 percentage points per year. Negotiators from Taiwan and the mainland are meeting at the Ta Shee Resort in the northern county of Taoyuan March 31 and April 1 for the second round of ECFA talks. The inking of a pact is widely expected to occur later this year. Spencer pointed out that based on the major rebound in exports recently and the progress toward an ECFA, Deutsche Bank has revised upward its growth forecast for Taiwan’s GDP to 6.1 percent for this year and 4.2 percent for 2011. Besides the anticipated benefits of the signing of an ECFA on Taiwan’s GDP, it is also expected to have a positive impact on the island’s unemployment, according to Spencer. Even if businesses in the manufacturing sector shift their base to the mainland, new types of job opportunities will be created on the island, Spencer said. He forecast that Taiwan’s average unemployment rate would fall to 5 percent for this year and drop even further to 4 percent for 2011. Nevertheless, Spencer said that in the long term, because of mainland China’s tightening monetary policy and slackening private consumption growth, Taiwan’s future economic growth prospects would continue to be tied mainly to the economic situation in its major overseas markets, such as the United States and Europe. (SB)