The government’s latest statistics confirmed that the nation’s economic activity in the third quarter grew at its slowest pace in two years and posted the first quarter-on-quarter contraction since the first quarter of 2009. Meanwhile, the government revised downward its GDP growth forecast for this year for the fourth time in six months and lowered the forecast for next year on rising global uncertainties.
According to the Directorate-General of Budget, Accounting and Statistics’ (DGBAS) advance third-quarter GDP data released on Thursday, the economy expanded 3.42 percent from a year earlier, slightly higher than the 3.37 percent the statistics bureau’s Oct. 31 estimate. On a seasonally adjusted quarterly basis, third-quarter GDP shrank 0.15 percent from the previous quarter, in contrast with the 0.28 percent contraction predicted earlier.
For this quarter, the DGBAS expects the economy to grow 3.69 percent year-on-year, down from 4.71 percent predicted on Oct. 31. The statistics bureau forecast the economy would expand 4.51 percent this year, versus its previous estimate of 4.56 percent, and predicted 4.19 percent growth next year, down from its previous estimate of 4.38 percent.
The government’s GDP growth revisions reflect Taiwan’s strong dependence on exports and the nation’s sensitivity to global macroeconomic trends. Other economic data released last week provided more bad news for the nation’s economic prospects.
The Ministry of Economic Affairs (MOEA) on Wednesday said industrial production increased 1.41 percent year-on-year last month, from a 1.84 percent rise in September.
Export order data released on Monday showed demand for Taiwan’s overseas shipments over the next one to three months had slowed to single-digit growth rates for three consecutive months. The MOEA data showed export orders rose 4.38 percent year-on-year last month to US$37.21 billion, with demand from China and the US expanding, while demand from Europe and Japan slowed.
Nonetheless, the latest unemployment figure released on Tuesday caught many people by surprise, as it was the third time in 10 years that October’s rate was higher than September’s, implying the domestic labor market is facing growing headwinds in the face of more workers taking involuntary furloughs. The jobless rate was 4.30 percent last month, versus 4.28 percent in September, according to DGBAS data.
With overseas trade comprising 70 percent of the nation’s economic output, external uncertainties have inevitably impacted on domestic manufacturers. This is likely to trigger a ripple effect into private consumption and investment in the months ahead.
Against this backdrop, the government said on Thursday it was proposing new economic stimulus plans to shore up consumer and investor confidence as the stock market plunged 6.21 percent last week, the fourth week of losses and the biggest drop since late September. Local media reports say the stimulus measures expected to be announced by the government on Wednesday will focus on boosting exports, expanding private consumption and investment, stabilizing financial markets, increasing domestic employment and maintaining low inflation.
Having stimulus plans ready is one thing, but making the plans work is another. As officials now realize the growing importance of attracting private investment to stimulate economic activity amid faltering exports, they must do all they can to fix any planning or legal obstacles to major investments in infrastructure, manufacturing and services industries.
However, consumers are mostly ignoring government data about GDP and exports, focusing instead on job uncertainty and disposable income, as well as high housing prices and the widening wealth gap. Frustration with these issues will undercut consumers’ confidence in the government’s stimulus plans and further weaken the economic outlook.
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