Taiwan sees budget delay slowing GDP growth

Taipie, May 29: Taiwan's premier said today that a prolonged delay in passing the 2007 budget would take a bigger bite about 0.45 to 0.6 percentage point out of the island's economic growth rate than previously forecast.

Newly appointed Premier Chang Chun-hsiung told a press conference that the current year's 1.6638 Taiwanese dollar trillion (50 billion dollar) spending remains at the heart of a partisan dispute in the legislature.

Previous estimates had predicted the budget delay would slow economic growth 0.25 to 0.3 percentage point, Chang said, noting that parliament should have approved a budget in November.

Last week, Taiwan's statistics agency said it expected the tech-reliant economy would expand by 4.38 per cent this year, slower than 4.68 percent last year.

''This is my eighth day in office and my heart is full of apprehension,'' Chang said, adding that road, school and healthcare initiatives had been stalled for lack of a spending plan. ''Now it's almost June and it still hasn't passed.'' The proposed 2007 budget includes 70.61 billion Taiwan dollar of new spending, mostly for defence and about 10 billion Taiwan dollar for infrastructure, a driver of the GDP.

Due to the delay, the government cannot launch new capital projects, which hampers economic growth, or purchase new military equipment. However, it can still operate using part of the latest year's budget.

Reuters>