TAIPEI: Taiwan will emerge from the pall cast by the global economic downturn to return to positive growth in 2010, Academia Sinica, the island's top academic research institute, said yesterday.

Academia Sinica's Institute of Economics predicted that Taiwan's gross domestic product (GDP) will grow 4.73 percent next year, the most optimistic forecast of any made to date by a domestic economic research institution.

The Chung-Hua Institution for Economic Research has offered the next most optimistic assessment, forecasting growth of 4.66 percent, followed by estimates of 4.57 percent by the Polaris Research Institute, 4.45 percent by the Taiwan Research Institute and 4.21 percent by the Taiwan Institute of Economic Research.

The Executive Yuan's Directorate General of Budget, Accounting and Statistics has forecast economic growth of 4.39 percent in 2010.

Taiwan's economy is expected to contract by 2.46 percent this year, Academia Sinica said, but it cited a number of indicators pointing to a better 2010.

Export growth turned positive in November, manufacturing growth rose by 8.04 percent in October, the strongest growth since May 2008, and GDP in the fourth quarter of the year will rise 7.17 percent, the research institute noted.

"The outlook for 2010 is expected to extend the current recovery that started in the latter half of 2009," Academia Sinica said in a statement summarizing the report. "Stimulated by the expectation of global recovery, investment in Taiwan is expected to increase by 7.81 percent."

The anticipated economic growth, however, could be derailed by some uncertainties, including the tenor of negotiations between Taiwan and the mainland on a proposed economic cooperation framework agreement (ECFA), said Institute of Economics researcher Ray Yeutien Chou.

He explained that if talks on the controversial trade pact proceed in a peaceful environment without vigorous opposition and protests, it could have a beneficial impact on the economy.

Chou also cited Taiwan's high unemployment rate, which stands at nearly 6 percent, and sluggish domestic consumption as major challenges to the island's economic development.

The researcher also noted that although the Dubai financial crisis has been defused, there are still some potential hidden bombs that could trigger a second wave of recession.

Some Asian economies, particularly the mainland, have major asset bubbles that could burst, he warned.

Despite these uncertainties, Chou said he believes investment in inventories will help fuel growth as traders build up inventories in anticipation of higher demand.

If the current recovery maintains its pace and the government continues efforts to help local businesses emerge from the economic slump, Chou said it was conceivable that unemployment could drop to the government's target of 4.9 percent in 2010 and GDP growth could hit 4.8 percent.

China Daily/CNA

(HK Edition 12/23/2009 page2)