Sat, Aug 15, 2015 - Page 1 News List

DGBAS halves economic growth outlook

POOR PROSPECTS:DGBAS Minister Shih Su-mei blamed the drop on poor exports and the global economy. FSC head William Tseng voiced shock at the size of the cut

By Crystal Hsu  /  Staff reporter

Trucks are unloaded at a port in Taiwan on Thursday last week.

Photo: CNA

The government yesterday cut its forecast for GDP growth this year by more than half — from the 3.38 percent projected in May to 1.56 percent — on worse-than-expected export results due to weaker demand and tougher competition from Chinese technology firms.

The drastic cut came after the economy grew just 0.52 percent last quarter, weaker than the 0.64 percent pickup estimated last month, and is expected to soften further amid a global slowdown, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said.

The revised 0.54 percent GDP growth in the second quarter, compared with a 0.64 percent increase released on July 31, represented the first seasonally adjusted annual decline of 6.56 percent in six years, the DGBAS said.

“Poor external demand underpinned the showing, as exports account for 60 percent of GDP,” DGBAS Minister Shih Su-mei (石素梅) told a news conference in Taipei.

The stalling global economy is bad for consumer electronics sales, which drive 40 percent of overall exports, Shih said.

Taiwan is home to the world’s largest chipmakers, smartphone vendors and component suppliers.

Personal computer, smartphone and tablet shipments all suffered from tepid external demand, while wearable devices failed to make a big splash, the minister said.

As a result, inventory adjustments are being stretched out and increasing competition from the Chinese supply chain is exacerbating the situation, Shih said.

Exports are now forecast to contract 7.1 percent this year, a jump from a 2.62 percent decline projected in May, the report said.

For the first half, the economy managed a growth rate of 2.14 percent, but the pace might decelerate to 1.01 percent in the second half, consistent with tepid external demand, Shih said.

However, the stable job market and household income might lend support to private consumption, which is likely to register a 3.05 percent increase this year, 0.29 percentage points stronger than the estimate in May, the agency said.

The forecast did not factor in potential disruptions from financial market volatility caused by currency depreciations or the much anticipated potential rate hikes by the US Federal Reserve, DGBAS statistics section chief Wu Pei-hsuan (吳佩璇) said.

The agency’s forecast did not anticipate the massive job cuts announced by smartphone maker HTC Corp (宏達電) on Thursday, Wu said.

Global financial market swings and monetary policy changes by major economies could upset Taiwan’s economy, DGBAS statistics division director Tsai Hung-kun (蔡鴻坤) said, adding that geopolitical twists can also spell risks.

For example, cheaper oil prices are dragging down the inflationary gauge, with the consumer price index now forecast to contract 0.19 percent this year, rather than increase 0.13 percent, the report said.

The agency dismissed concern about deflation, citing the positive core consumer price index.

Financial Supervisory Commission (FSC) Chairman William Tseng (曾銘宗) said that he was surprised by the size of the downward adjustment, adding that the statistics reflect a big gap between the economy and projections.

The impact of the economic slowdown on businesses will be visible once listed companies begin to release their financial status reports, he said.

While the commission has taken measures to relax securities lending and collateral, Tseng said that it would continue to monitor the market to decide if further action is needed to stabilize the situation.

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