Taiwan’s economy expanded at a slower pace than economists estimated in the first quarter as a faltering global recovery hurt exports, increasing pressure on the central bank to extend an interest-rate pause to aid growth.
Gross domestic product rose 1.54 percent in the three months through March from a year earlier, after increasing 3.72 percent in the fourth quarter, the statistics bureau said in a preliminary report in Taipei today. The gain was less than all estimates in a Bloomberg News survey of 17 economists, where the median was 3.1 percent.
The island’s growth slowdown adds to signs of a cooling global economy after China and the U.S. expanded less than analysts estimated last quarter. Taiwan’s export orders and industrial output for March unexpectedly fell, while Japanese and South Korean production missed forecasts as faltering demand limits Asia’s recovery.
“Taiwan’s GDP is a reflection of a sluggish global recovery and the decline of global demand, notably from China,” said Raymond Yeung, a Hong Kong-based senior economist at Australia & New Zealand Banking Group Ltd. The data suggests the monetary policy stance will be maintained, “unless there is a significant contraction of the regional economies from unforeseeable risks, including avian flu.”
The benchmark Taiex stock index gained 0.8 percent at 9:53 a.m. in Taipei. The Taiwan dollar climbed 0.3 percent to NT$29.464 against its U.S. counterpart, according to Taipei Forex Inc. It has declined about 1 percent this year.
Taiwan last week confirmed an H7N9 bird flu infection in a traveler returning to the island from China, the first incidence of the killer virus spreading outside the mainland. The island’s economy contracted after an outbreak of severe acute respiratory syndrome, or SARS, hit Taiwan in February 2003, as companies and individuals cut back on travel, dining out and entertainment.
President Ma Ying-jeou has sought closer trade and investment ties with China to bolster the island’s economy. Taiwan has allowed domestic lenders to conduct yuan business and doubled the quota for mainland visitors, and this month said it will let Chinese lenders own as much as 20 percent of some financial institutions.
Export orders, an indication of shipments in the next one to three months, fell for a second straight month in March. Overseas sales are equivalent to about two-thirds of the economy. HTC Corp., Taiwan’s largest smartphone maker, this month posted its lowest quarterly profit on record after the delay of its newest flagship phone.
The statistics bureau in February raised its forecast for GDP growth this year to 3.59 percent, and said inflation may average 1.37 percent, with exports growth of 6.23 percent.
Private consumption gained 0.35 percent in the first quarter from a year earlier, slowing from a 1.55 percent pace in the previous three-month period, today’s report showed.
The International Monetary Fund earlier this month lowered its forecasts for global growth and China’s expansion this year, and said yesterday that Asian economies face the risks of financial imbalances and rising asset prices fueled by strong credit growth and easy financing conditions.
Governor Perng Fai-nan has said the monetary authority will maintain order in the foreign-exchange market if needed, and asked lenders to exercise discipline while extending mortgages in areas where property prices have risen. The central bank held the benchmark discount rate on 10-day loans to banks at 1.875 percent for a seventh meeting last month.
The weak worldwide demand “would worry the central bank,” said Ma Tieying, a Singapore-based economist at DBS Group Holdings Ltd. “It is most likely to keep rates on hold in coming quarters to support the economy.”