02.20.2001
Increased fiscal spending to the rescue?

• The government unveiled yet another package of eight financial measures yesterday in an attempt to boost the slowing economy.

• The measures include the promotion of stable energy and water supply; the easing of restrictions on foreigners' ownership of real estate, the relaxation of limits on white-collar foreign workers on the island; the removal of the 0.1% transaction tax on corporate bonds to stimulate the bond market; and the extension of the deadline for filing income tax reports from March to May.

• We are of the view that the measures, aimed at boosting confidence in the government, will not have an immediate impact on the economy. In a separate move, the Council for Economic Planning and Development (CEPD) reiterated that the government will boost fiscal spending in 2001 in order to make up for exports' decreasing contribution to GDP in the wake of global economic slowdown. This follows the government's previous announcement that it will hike fiscal spending by US$3.4b in 2001.

• On 16 February, the government revised 2001 GDP growth forecast down to 5.3% from 6.0%. According to the CEPD, should the government fail to achieve its projected spending increase this year, then GDP growth forecast will suffer a further downward revision.

• We maintain our view that GDP growth will come in at 4.5% in 2001 as export and private investment growth continue to lag. We forecast export and private investment growth of 5.5% and 4.0%YoY, respectively, in 2001.

IrmakSurenkok@Primasia.com +886-[0]2-2547-8873