Weaker-than-expected GDP growth surprises analysts

The nation's weaker-than-expected economic performance in the first quarter came as a surprise to most economists at foreign investment banks and has led to a downward revision of Taiwan's gross domestic product (GDP) growth forecast this year.

"This is a surprise on the downside," Enoch Fung, associate economist at Goldman Sachs Asia, said in a report released yesterday.

On Thursday, the Directorate General of Budget, Accounting and Statistics (DGBAS) reported that the nation's GDP growth plunged to 2.54 percent in the January-March quarter from 3.25 percent in the previous quarter, marking the lowest level since the SARS epidemic hit Taiwan in the second quarter of 2003.

The result fell below the market consensus of 3.2 percent, dragged down mainly by the nation's slowing export growth due to the softness in the global economy, Fung said.

Despite the weakening export figure, the economist said the impetus of domestic consumption, driven by the expected improvement in the labor market in the second half of this year, could still bolster the nation's economy.

For the whole year, GDP is expected to stand at 3.63 percent growth from the previous prediction of 4.21 percent, DGBAS said.

Another economist appeared to be more bearish about Taiwan's economic outlook.

"Given the weaker-than-expected first-quarter numbers, we have revised the 2005 real GDP growth forecast for Taiwan to 3.8 percent from our previous forecast of 4.3 percent," JP Morgan Chase Bank's economist Grace Ng (吳向紅) said in a report released yesterday.

Looking ahead, the outlook for a moderate upturn in global economic activities and the tech sector during the last half of this year becomes an increasingly critical factor for the expected rebound in Taiwan's economy later on in the year, Ng said.

JP Morgan has seen encouraging signs that the nation's exports showed a steady recovery trend last month, particularly supported by the moderate uptick in tech exports, she said.

Morgan Stanley, however, maintained its GDP forecast of 4 percent for this year, a level that is even higher than the official prediction after the DGBAS's downward revision, citing its confirmation of an orderly cyclical slowdown.