Taiwan’s economy contracted at a record pace in the first quarter as exports contracted faster than expected, prompting the government to trim the GDP forecast for this year to a decline of 4.25 percent with an assurance that the recession will ease from this quarter.
The Directorate-General of Budget, Accounting and Statistics (DGBAS) unveiled the latest economic data yesterday, which showed GDP sinking by a record 10.24 percent, worse than the revised 8.6 percent fall in the fourth quarter of last year.
“Exports shrank by an unprecedented 36.6 percent in the first quarter, which has been the main brake on the economy,” DGBAS Director-General Shih Su-mei (石素梅) told a media briefing yesterday.
Slumping exports had lowered factory utilization rates, dampened private investment, pushed up unemployment and curbed consumer spending, Shih said.
“Together, export-related factors sank GDP by 7.7 percentage points, accounting for three quarters of the first-quarter downturn,” the statistics official said.
Private investment dropped 41 percent, while private consumption dipped 1.41 percent between January and March, the report said.
As the global landscape remains dismal, the DGBAS revised down the GDP prediction to minus 4.25 percent for this year, from minus 2.97 percent forecast in February, Shih said.
Tsai Hung-kun (蔡鴻坤), DGBAS statistics division director, said the recession had hit bottom and economic data would show an improvement this quarter.
The economy is expected to contract 8.5 percent and 2.98 percent in the second and third quarters respectively, recovering to grow 5.2 percent in the fourth quarter, the report said.
“The worst is over as seen by rising export figures and the rallies in the equity market,” Tsai said.
Exports, the mainstay of the economy, are forecast to drop 21.81 percent this year, with a decline of 32.87 percent in the second quarter and 21.31 percent in the third quarter, the report said.
Data is expected to register a positive growth of 11.31 percent in the fourth quarter.
Tsai said government spending and Chinese tourists would also facilitate recovery.
“Assorted stimulus measures are expected to lift GDP by 2.97 percentage points this year,” Tsai said.
“The economy would contract 7.22 percent otherwise,” he said.
Cheng Cheng-mount (鄭貞茂), head economist at Citigroup Taiwan Inc, agreed the downturn has bottomed out and GDP will improve in coming quarters, albeit at a very slow pace.
Cheng said the worse-than-expected GDP figure for the first quarter is likely to negatively affect investor optimism a bit and could lead to the central bank holding rates unchanged for an extended period.
“However, a better economic outlook and ample liquidity should continue to underpin financial market performance,” he said.
Tony Phoo (符銘財), chief economist at Standard Chartered Bank in Taipei, said yesterday that while it was too early to speculate on recovery based on the GDP figures released, a deeper recession was unlikely for the rest of the year.
“The economy is likely to rebound gradually in the second half, driven by the recovery in domestic demand, especially under the impacts of the government’s NT$150 billion stimulus package and improving cross-strait relations,” Phoo said.
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