The government raised the specter of a recession yesterday after reporting that the economy contracted in the third quarter and could shrink further in the coming quarters.
A recession is defined as two consecutive quarters of contraction.
The Directorate-General of Budget, Accounting and Statistics (DGBAS) said that GDP shrank 1.02 percent in the third quarter from a year ago and could contract another 1.73 percent in the fourth quarter, dragging down this year's full-year growth rate to 1.87 percent, from the 4.3 percent it estimated in August.
As the economic contraction is expected to persist into the first quarter of next year, the DGBAS slashed its GDP growth forecast for next year by more than half to 2.12 percent from the 5.08 percent it predicted in August in the face of slumping exports and tight consumer spending.
Minister of the DGBAS Shih Su-mei (石素梅) said the financial storm that was battering the US and Europe was contributing to recessionary fears as these are the major markets for Taiwanese electronics and communication products.
Shih said the economic picture would remain drab in the first quarter of next year when GDP is forecast to dip 0.31 percent and start a slow recovery for the rest of the year, spurred by increasing government spending and a fiscal stimulus plan.
Exports, the main driver of the nation's economy, declined 0.45 percent in the third quarter and are expected to drop 3.99 percent in the last quarter, the DGBAS report said, predicting that outbound goods and services would contribute a negative 2.53 percent to the economy next year.
Statistics Bureau Director Tsai Hung-kun (蔡鴻坤) said exports were unlikely to rise in the first three quarters of next year, with Taiwan's major trading partners battling recession themselves.
The trend is likely to reverse in the fourth quarter when exports are forecast to gain 1.28 percent, Tsai said.
Inflation, the government's biggest worry last summer, is projected to rise 3.64 percent this year and decelerate to 0.37 percent next year, the report showed.
Tsai dismissed concerns about deflation, saying consumer prices would continue to advance though at a mild pace.
Tsai conceded that GDP growth next year may prove elusive if the government fails to successfully implement measures to stimulate the economy, such as its planned distribution of consumer vouchers to spur spending.
The voucher plan is forecast to lift the economy by 0.64 percentage points next year, while Chinese tourists are expected to contribute an extra 0.5 percentage points.
The DGBAS put the number of Chinese tourists visiting Taiwan at 3,000 a day next year — although the number averaged 273 in the third quarter and is expected to rise to 500 in the last quarter.
Annual per capita income is estimated at US$18,020 this year and to fall to US$17,651 next year, the report said.
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