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Taiwan falls deeper into a recession

Taiwan and Singapore, Asia's two worst-performing economies, sank deeper into recession in the third quarter, underscoring the toll slumping exports are taking on the region as US growth stalls.

Taiwan's economy shrank 4.21 percent from a year earlier, the second quarterly decline in a row and the steepest in 26 years.

Singapore's economy shrank at an 11.1 percent annual pace in the third quarter, more than initially estimated, and was 5.6 percent smaller than a year earlier.

Both countries are counting on US demand for their computers, memory chips and other electronic gear to power a recovery. That may be some time off after the Sept. 11 attacks -- Singapore's non-oil exports last month dropped 22 percent from a year earlier, figures yesterday showed.

"The decline should continue for another two quarters unless there's a clear-cut change in the electronics cycle," said Tan Kang Yong, an economist at UOB-Kay Hian Research Pte in Singapore.

Exports account for about four-fifths of Singapore's US$92 billion economy. The government estimates GDP will decline 3 percent this year, the worst recession since independence in 1964, after jumping nearly 10 percent last year.

Taiwan's exports, which account for about half the economy, have been dropping since March. The country has also been hit by an exodus of companies to China, where labor costs are lower.

That's helped push unemployment to a record 5 percent.

"Besides the weak global economy, there is restructuring in Taiwan with industry being relocated to China," said Ci Ci Leung, an economist at JP Morgan Chase & Co in Hong Kong. "That's leading to a fall in investment, increased unemployment and a drop in spending."

Both Taiwan and Singapore are trying to boost domestic growth to offset the drop in exports.

Singapore has announced US$6.2 billion of extra spending, tax cuts and interest-bearing "shares" to be distributed to citizens to shore up growth. Taiwan's central bank has slashed interest rates 11 times since December to a record-low 2.25 percent.

Other Asian economies are slowing or shrinking as exports drop. Japan's economy will probably shrink 0.9 percent in the fiscal year to March, its worst recession since 1980 and fourth since the so-called bubble economy burst in the early 1990s.

Malaysia's economy grew 0.5 percent in the second quarter from a year earlier, the slowest in two years. Indonesia yesterday trimmed its growth forecast for the year to 3.3 percent from 3.5 percent. In Korea, Finance Minister Jin Nyum said Asia's third-biggest economy will grow as little as 2.3 percent this year, barely a quarter last year's pace.

Singapore-based Chartered Semiconductor Manufacturing Ltd (特許), the third-biggest maker of custom-designed chips, has idled some equipment, cut salaries and forced some employees to take time off. Its third-quarter sales fell 74 percent from a year earlier.

The city of 4 million people may lose 25,000 jobs this year as companies such as Datacraft Asia Ltd. fire workers. Datacraft, which installs computer networks, said earlier this month it would fire 230 people, or about 12 percent of its staff.

In Taiwan, corporate investment tumbled 36.8 percent in the third quarter from a year earlier as sales and profit shrank at companies like VIA Technologies Inc (威盛電子). VIA, the second-largest maker of chipsets that control computers, lowered its 2001 earnings forecast by 40 percent after third-quarter profit fell almost two-thirds.
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