project will founder unless the government presents a new proposal that
that includes a far greater proportion of private investment. This it plans to do, but the passage of the BOT law will be needed before the project makes any real progress. It is by no means certain that it will ever materialise.
Consumption
*
the private sector leads.
17. Growth in private consumption was patchy in the first three quarters, but should reach about 7 per cent for the year. There have been strong increases in spending on leisure and entertainment, education and medical care, foreign travel
travel and other services, but slower growth in sales of cars and durable goods. Private consumption is making an increasingly significant contribution to economic growth and the
the savings rate is dropping correspondingly.
}
18. Government consumption meanwhile, due to reduced spending since July, is expected to rise only 3.8 per cent for the year, down from 4.32 per cent in 1992, with real-term growth of only 0.4 per cent. This will contribute nothing to GNP growth, compared to a positive contribution of 7 to 12 per cent in years past.
Exchange Rate - Currency depreciates
19. In the year to the end of August, the NT dollar depreciated about 6 per cent
per cent against the US dollar and 23 per cent against the Japanese yen, causing sharp rises in import and export prices, due mainly to
the heavy dependence of industry on imported Japanese components. It has done nothing noticeable to boost export performance, because the economies of major export markets in the west remained weak. The NT was pressured in the
in first half by the shrinking trade surplus, heavy downpayments for arms imports and increased imports related to the Six Year Plan. The sudden influx of foreign funds into the the stock market following the November local elections began to push the NT dollar back up, but in the medium term, the central bank is likely to keep it in a narrow 26-27 to 1 US dollar range.
Prices and wages
20. The consumer price index rose only 3.2 per cent in the first half, but was expected to surge in the second half due to seasonal typhoons (which send fresh produce prices soaring) and the depreciation of the NT dollar. However, wage rises were moderate, as
as were rises in property rentals, state-set oil prices were cut twice, and in freakish weather, not one typhoon hit the island all year. These factors offset the ΝΤ dollar's depreciation, but rises in services fees and utilities were expected to push the CPI up a bit in the second half, to 3.8 per cent, for a year's rise revised downwards from 3.55 per cent to 2.87 per cent. This would be the smallest increase in five years. However, there remains a fear of import-led cost-push inflation,
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