The government yesterday lowered its economic growth forecast for the first quarter to an annual contraction of 0.84 percent, from the 0.64 percent contraction it projected in February, as tepid global demand continue to crimp the nation’s exports.
The forecast marks the third consecutive quarter of negative economic growth, approaching the five-quarter streak of decline in 2007 and 2008, during the height of the global financial crisis, Directorate-General of Budget, Accounting and Statistics (DGBAS) section chief Wang Shu-chuan (王淑娟) told a media briefing.
“In addition to slowing growth of global demand, rising competition from China is also a factor, with cross-strait economic ties turning from cooperation to rivalry as Beijing implements import substitution policies,” Wang said.
Photo: Cheng Chi-fang, Taipei Times
Amid continued decline in prices for agriculture products and industrial materials, the nation’s exports in US dollar terms fell 12.11 percent last quarter, while imports shrank by 13.99 percent, Wang said.
After inflationary adjustments, the first-quarter decline in exports was 3.93 percent from a year earlier, worse than the DGBAS’ forecast of a 2.36 percent drop, while imports fell 0.94 percent from a year earlier, compared with the agency’s estimate of a 0.53 percent increase.
The worse-than-expected exports and imports dragged down the nation’s economic growth by 2.06 percentage points in the first quarter, the DGBAS said in a report.
The DGBAS said private investments were also lower than expected in the first quarter, leading to a drop in capital formation.
Although investments in machinery showed signs of recovering, investments in the construction sector were on the decline, which weighed on total private investments, the DGBAS said.
As a result, Taiwan’s capital formation for the January-to-March period fell 2.48 percent from a year earlier, compared with a forecast 0.94 percent increase, according to the DGBAS.
Despite discouraging external factors, domestic consumption grew 1.84 percent year-on-year in the first quarter, propelled by a 2.85 percent rise in retail sales and a 3.06 percent gain in restaurant sales.
However, the nation’s economic growth momentum has yet to recover from a lingering downturn that began in the second quarter last year, Wang said.
Therefore, despite a sequential improvement from a contraction of 0.52 percent in the final quarter of last year, growth momentum has remained weak and it is still unclear whether GDP growth will hit 1 percent this year, she said.
In February, the DGBAS predicted a 1.47 percent gain this year.
Yuanta Securities Investment Consulting Co (元大投顧) economist Woods Chen (陳森林) said in a note that GDP growth this quarter might show an annual contraction of 0.3 percent as macroeconomic conditions remain mixed.
The Taiwan Institute of Economic Research (台灣經濟研究院) on Monday cut its full-year forecast for GDP growth for the second time this year to 1.27 percent, from 1.53 percent estimated three months earlier.
Additional reporting by CNA
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