The economy is expected to shrink next year much faster than the government initially estimated, making the nation the worst performer of the four Asian tigers and among the 20 slowest-growing economies in the world, the Economist Intelligence Unit (EIU) said on Friday.
In its annual forecast report 2009: Country by Country, the EIU, a research unit of The Economist, predicted Taiwan’s GDP growth would contract 2.9 percent next year as the global financial turmoil weakens demand for Taiwanese products, while domestic demand is unlikely to fill the void left by slumping exports.
Among other Asian tigers, Singapore is expected to see a GDP contraction of 2.2 percent next year, followed by South Korea’s 1.7 percent shrinkage and Hong Kong’s 1 percent decline.
The EIU forecast of a 2.9 percent contraction is lower than a 2.12 percent growth forecast made by the government’s Directorate-General of Budget, Accounting and Statistics on Nov. 20.
The figure also represented a sharp downward revision from the EIU’s previous forecast on Nov. 17, when it predicted 1.3 percent growth next year, and compares with predicted contractions of 1.6 percent by UBS, 1.7 percent by Fitch Ratings, 2 percent by Macquarie Research Equities and 3 percent by Goldman Sachs.
“The global financial crisis will continue to have a very damaging impact on the global economy in 2009, resulting in a sharp slowdown in economic growth that will spare few countries,” the EIU said in an e-mailed statement on Friday.
Taiwan appears to be headed into a technical recession after the bureau said on Nov. 20 that GDP shrank 1.02 percent in the third quarter from a year ago and could contract another 1.73 percent in the October to December period.
To help revive the economy, the nation’s central bank announced on Thursday it had slashed its benchmark interest rates by 75 basis points — the largest cut in 26 years — after an increasing number of tech companies reduced spending and reduced output in light of slowing global trade.
The EIU report predicted that global GDP growth would be 0.9 percent next year, with GDP contractions likely in 29 countries — including the US, Japan, the euro zone countries and the UK.
“China will be the fastest-growing major emerging market, although even it will see its growth rate ease substantially,” the EIU said in the statement.
The report predicted 7.5 percent economic growth for China next year, which would be the slowest growth the country has experienced in almost two decades.
Iceland will be the slowest-growing country next year with its GDP shrinking 9.7 percent from a year ago, while Qatar will see growth of 13.7 percent, making it the fastest-growing economy in the world, the EIU said.