Tuesday, 18 November 2008

Taiwan plans to issue shopping vouchers to boost GDP

TAIPEI (Reuters) - Taiwan plans to give $2.5 billion in shopping vouchers to consumers to help boost its export-dependent economy, suffering in the global slowdown, Premier Liu Chao-shiuan said on Tuesday.

The plan, still subject to parliamentary approval, will likely contribute 0.64 percent to the island's $390 billion gross domestic product (GDP) in 2009, Liu said. Some analysts said the impact could be smaller.

"The global tsunami is spreading and we will have to go through a period of economic chill. We have to resort to the extreme at an extremely difficult time like that," Liu told a news conference.

Liu said every individual in Taiwan's 23 million population would get T$3,600 ($101), costing the government T$82.9 billion. Previously, local media had speculated only low-income households would be eligible for the scheme.

Some analysts expressed mixed views on the programme.

"It's a fairly novel plan. There are not many Asian countries that are actually providing coupons," said Rob Subbaraman, an economist at Nomura in Hong Kong.

"My feeling is the risk would be the contribution to growth will be lower than that."

The plan is part of government efforts to boost the domestic economy. Others include T$122.6 billion worth of subsidies and tax cuts and another T$58.3 billion in infrastructure spending.

Taiwan's economic growth will likely slow this year. A handful of economists expect the export-led economy next year to even shrink due to deepening fears of a global recession dampening consumer sentiment.

In October the consumer confidence index fell to a 7-year low, reflecting a plunging stock market and weak purchases of durables, data from Taiwan's National Central University showed.

The economic-boosting measures will likely cause Taiwan's fiscal deficit to widen and exceed 2 percent of GDP this year and next, from only 0.1 percent last year.

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