The Taiwanese economy shrank at the sharpest pace since 2009, recording its second quarter of contraction in a row as a plunge in global demand for chips showed little sign of abating.
GDP in the first quarter of this year dropped 3.02 percent from the same period last year, the sharpest fall since June 2009, the Directorate-General of Budget, Accounting and Statistics (DBGAS) said.
Economists surveyed by Bloomberg forecast a fall of 1.25 percent.
Photo: CNA
“The first-quarter GDP is worse than expected, as exports and corporate investment contracted more harshly than our forecast,” DGBAS statistics division head Wu Pei-hsuan (吳佩璇) told a news conference in Taipei.
The agency expected GDP to decline at annual rate of 1.2 percent last quarter, Wu said.
The weaker-than-expected economic performance prompted the DGBAS to cut its GDP growth forecast for this year to 1.67 percent, from its estimate of 2.12 percent growth in February.
Concerning the new GDP growth estimate, Wu said there was still a chance that Taiwan sees an economic growth rate of more than 2 percent, taking into account the effects of NT$6,000 rebates to Taiwanese and eligible foreign residents, which are forecast to boost GDP growth by 0.35 to 0.45 percentage points.
Private consumption in the first quarter grew 6.6 percent from a year earlier, mainly driven by a robust rebound in spending on dining in, accommodation, recreation and transportation, DGBAS data showed.
The consumption growth rate was 2.37 percentage points higher than the previous forecast made in February, it said.
The worse-than-expected contraction highlights an ongoing struggle to rediscover growth as Taiwanese exporters contend with falling overseas demand for their products.
Chip heavyweight Taiwan Semiconductor Manufacturing Co (台積電) said in an earnings call last week that the second quarter would likely be the bottom of the current business cycle before demand recovers later in the year.
Compounding the issue is a shortfall of workers willing to take jobs in the services industry, hampering domestic demand from mitigating the lackluster performance of the export sector.
The latest figures run counter to burgeoning signs of improvement in other export economies in the region.
South Korea’s GDP grew 0.3 percent in the first quarter, more than economists had expected.
South Korean officials project growth to pick up further by the end of the year.
China — Taiwan’s largest export market — saw its economy expand 4.5 percent in the first quarter. That was fueled in large part by surging consumption as shoppers, travelers and diners increased spending as the country’s strict COVID-19 controls ended.
There are some small signs of potential improvement for Taiwan.
The government’s monitoring indicator, an index of forward-looking data points, gained last month.
While the index’s reading of 11 indicates that the economy remains “sluggish,” it was the first improvement in the data since October last year.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
RSS