Moody’s says GDP growth falling short of potential

By Crystal Hsu  /  Staff reporter

Wed, Jul 31, 2013 - Page 13

Taiwan likely underperformed last quarter with GDP growth of 2 percent as weak global demand continued to constrain its export-oriented economy, Moody’s Analytics said yesterday.

The research arm of the international ratings agency made the observations in a note one day before the Directorate-General of Budget, Accounting and Statistics (DGBAS) is due to release major economic data for the second quarter.

“Soft global demand remains a drag on Taiwan’s economy and we expect second-quarter GDP growth to come in at 2 percent from the year-ago level,” said Katrina Ell, an associate economist in Moody’s Sydney office.

However, the second-quarter growth projection is stronger than the agency’s previous forecast of 1.5 percent and Moody’s attributed the upward adjustment to an unexpected surge in last month’s exports, although production and household consumption stayed weak.

Moody’s expects full-year GDP growth to reach 2.5 percent this year — providing the global economy improves in the second half — well short of a potential high of about 4 percent, Ell said.

“This is largely contingent on US demand gathering steam, a fate not guaranteed,” she added.

European demand for consumer electronics is likely to remain weak in the near term, while China’s outlook is uncertain, Ell said

Domestically, fiscal policy is set to provide a modest boost to the economy in the second half of the year, Moody’s said, referring to the five-year spending package introduced last month that aims to encourage consumer spending and domestic investment, as well as innovation.

In total, the stimulus measure is equivalent to less than 1 percent of GDP, Ell said.