After seeing annual GDP contract 0.16 percent in the second quarter, Taiwan could slide into a recession if global growth wobbled and demand for electronic products failed to recover, Moody’s Analytics said in a report yesterday.
The report came a day ahead of the Directorate-General of Budget, Accounting and Statistics’ (DGBAS) release of GDP growth and other major economic data.
“Taiwan’s recovery will falter if the US economy continues to underperform,” Moody’s Analytics economist Katrina Ell said in a note.
If the Chinese slowdown worsens, Taiwan will also suffer, she said.
The fiscal woes across the eurozone have already weighed on Taiwanese exports and played havoc on the earnings of major technology firms, including PC maker Acer Inc (宏碁) and smartphone maker HTC Corp (宏達電).
Acer, which saw its net income slump 72.1 percent year-on-year to NT$331 million in the first quarter, is scheduled to report its second-quarter results today.
HTC said last month its second-quarter net profit fell 57.77 percent from a year earlier to NT$7.4 billion, although it was up 65.55 percent from the NT$4.47 billion profit it made in the first quarter.
A recession occurs when a nation reports two consecutive quarters of economic downturn. Taiwan’s GDP edged up 0.4 percent year-on-year in the first quarter before contracting in the second quarter, rendering the reading this quarter critical.
However, Moody’s Analytics does not expect a recession to materialize for Taiwan as it projects 2 percent growth for this year, Ell said, betting on an improvement in the second half driven by product launches next quarter and an upturn in global demand.
“An improved fourth quarter is expected on the back of strengthening global demand and as Chinese stimulus measures lift regional growth,” the Sydney-based economist said in the note.
“But risks are tilted to the downside,” she wrote.
Forward-looking indicators of tech demand, including the US semiconductor industry’s book-to-bill ratio and manufacturing orders, have shown positive signs for the time being, Ell said.
Moody’s Analytics does not expect the central bank to shift its monetary policy in either direction throughout this year, as inflation is starting to test its 2 percent limit after heavy rain damaged crops and pushed up vegetable prices 32.8 percent last month.