The nation's economic growth fell to a 26-year low of 1.06 percent in the first quarter, as the global economic slowdown continues to take its toll on the export-driven economy.
The surprise news from the Directorate-General of Budget, Accounting and Statistics comes after earlier conservative predictions hoped to see gross domestic product (GDP) stay above 3 percent. GDP is the basic measure of a nation's economic output and income.
As for second and third-quarter growth, the Directorate-General predicted 3.26 percent and 5.15 percent growth respectively. Economic growth for all of 2001 was also slashed to 4.02 percent, from 5.3 percent predicted late February.
The stagnation is the result of slowing foreign orders which has idled factory production and choked company profits. Corporations have responded by laying off workers, only adding to the growing unemployment rate and lethargic domestic spending.
Responding to the announcement from the nation's top numbers crunchers, Premier Chang Chun-hsiung (張俊雄) said that while the economic climate has changed, the public should "remain optimistic and work even harder."
According to Chang this is as bad as things are going to get.
"We have reached the bottom in the first quarter and will see a gradual rebound beginning in the second quarter."
But the Ministry of Economic Affairs said in a statement that they had forecasted the bottom to be in the third or fourth quarter.
Pundits meanwhile were mixed on what the government should do to end the economic slide.
Bert Lim (
GDP growth below 2 percent "is quite serious. But the current account surplus through April is still sound," Lim said. An account surplus is created when a nation sells more exports than it buys in imports.
According to Lim, the real problem behind Taiwan's economic growth is a confidence crisis in both investments and consumer spending.
"Consumption is a serious a problem. The public is not spending now, you can see it at street level," he said. To remedy the problem Lim said that Chen Shui-bian's (
"The government should start from the bottom up. Stimulate private consumption [and therefore] rejuvenate small businesses, thus helping to stimulate overall economic growth," Lim said.
But Timothy Bond, an economist at Merrill Lynch, said that the government should allow for a "faster depreciation" of the NT dollar to help stimulate exports.
Rumors have circulated in the media since last week that the central bank may let the NT dollar weaken significantly to boost exports by making them cheaper for foreign buyers.
Exports fell 3.5 percent in the first quarter from last year.
Business tycoon Wang Yung-ching (
But the premier, responding to Wang's comments, disagreed, saying the NT$810 billion public infrastructure plan is the right course to chart.
"Increasing public spending on infrastructure projects is accurate and will be effective in the short term," he said.
Directorate-General of Budget, Accounting and Statistics chief Lin Chuan (
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