The recession at home and in the US bottomed out in the first quarter and Taiwan’s economy has started to recover in a slow but steady fashion, a chief economist at SinoPac Financial Holdings Co (永豐金控) said yesterday.
“Based on our initial estimate, the nation’s GDP is likely to have contracted by 6.7 percent in the first quarter,” Jack Huang (黃蔭基), head of research at SinoPac Financial, said by telephone, citing the latest data on the economic landscape worldwide.
“While overall economic activity will remain weak this year, recovery is underway at a slow pace,” Huang said.
SinoPac forecast the nation’s economy would shrink by 2.65 percent year-on-year this year, dragged down chiefly by slumping exports and private investment.
Huang said the US, Taiwan’s second-largest trade partner and main market for consumer electronic products, had gone through a 14-month recession that spanned from December 2007 to January this year.
“The end of the recession partly explains why the equities market in the US, Shanghai and Taiwan all shot up 1,500 points in the first quarter,” Huang said. “Even the most pessimistic people have quit making negative comments on the economy.”
Exports, which account for 70 percent of Taiwan’s GDP, declined by 36.6 percent year-on-year in the first quarter to US$40.55 billion, the Ministry of Finance said last week. That was compared with a decline of 24.7 percent to US$51.22 billion in the final three months of last year.
The ministry, however, took solace in the fact that the exports gained US$2.99 billion, or 23.8 percent, last month from February.
Huang said the slackening decline in China’s exports to 17 percent last month, from a 25.7 percent slump in February, strengthened his upbeat sentiment.
While China is not strong enough to pull the world out of the recession, it absorbs 40 percent of Taiwan’s exports and the Chinese government’s stimulus has benefited local tech firms with rush orders for flat panels and other electronic products, Huang said.
“As a result, Taiwan’s economy is expected to recover to a growth of 2 percent in the fourth quarter, after contracting 4.8 percent and 1.3 percent in the second and third quarters, respectively,” Huang said.
He said that the consumer vouchers would temper the impact of the recession on private consumption, while private investment and other GDP components would remain subdued.
Other economists agreed the second quarter showing would improve, but they shied away from speculating on a concrete recovery.
Standard Chartered Bank’s chief economist Tony Phoo (符銘財) said last week it was unlikely that exports would deteriorate further and the third quarter was a critical juncture because exports would enter the high season and the government stimulus should start to help lift the economy.
“A sustained recovery, however, hinges on global revival,” he said.