The nation’s economy grew at its slowest pace in more than two years in the fourth quarter of last year, government statistics showed yesterday, raising the likelihood that the central bank would extend its pause on rate hikes, or even lower its key interest rates in order to boost private consumption and investment.
Taiwan’s GDP expanded 1.9 percent in the fourth quarter compared with a year ago, lower than the 3.69 percent growth estimated in November and also the lowest growth rate since the third quarter of 2009, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.
The seasonally adjusted annualized GDP rate declined 0.98 percent in the fourth quarter from the previous quarter, sliding for the second straight quarter, leading the nation into a technical recession.
“The gloomy global environment has dragged Taiwan into a technical recession,” Sydney-based Katrina Ell, an associate economist at Moody’s Analytics, said in a research note.
If global conditions deteriorate further, the central bank might have to reverse at least some of the previous rate hikes, Ell said.
However, the DGBAS said it is too early to say that Taiwan’s economy is entering a recession, as the decline in the seasonally adjusted annualized GDP rate remained mild in the third and fourth quarters of last year.
“It is more appropriate to say the economy has slowed,” a DGBAS section chief surnamed Mei (梅) told a press conference in Taipei yesterday.
Mei attributed the weaker-than-expected economic growth in the fourth quarter to lower exports. The output sector rose slightly by 0.43 percent in the fourth quarter from a year earlier, which was lower than the DGBAS’ earlier forecast of 4.2 percent.
Worse-than-expected exports further dragged down domestic investments, causing the capital formation sector to decline 19.24 percent year-on-year in the fourth quarter, the DGBAS said.
In addition, a bearish stock market performance in the fourth quarter cut the public’s consumption momentum, dragging expansion in private consumption to 1.66 percent, lower than the 2.83 percent growth forecast by the DGBAS in November, Mei added.
Full-year GDP growth stood at 4.03 percent last year, down 0.48 percentage points from the 4.51 percent expansion forecast by the DGBAS, with per capita GDP standing at US$20,154, statistics showed.
Meanwhile, similar worries about exports amid the current global economic uncertainties caused the DGBAS to cut its forecast for economic growth this year to 3.91 percent, down from 4.19 percent estimated in November.
However, Taipei-based Standard Chartered Bank economist Tony Phoo (符銘財) remained optimistic about the middle to long-term growth in Taiwan’s economy, as the re-election of President Ma Ying-jeou (馬英九) would boost the confidence of domestic as well as international investors, Phoo said.
“We see the possibility that the widely anticipated cross-strait investment protection agreement will be signed this year, which will likely draw increased foreign investment from China,” Phoo said in a research note.
“Coupled with expanding bilateral trade and tourism flows, this will help lift domestic growth,” he added.
Phoo expected overall growth to average about 2 percent in the first half of this year, owing partly to the base effect, before returning to 4 percent growth in the second half of the year.