Taiwan GDP Shrinks in Fourth Quarter as Slower China Drags

  • Fourth-quarter GDP contracts 0.28%, beating estimates
  • Exports have dropped in last 11 months amid China's slowdown

Taiwan’s economy contracted on a yearly basis for a second straight quarter as China’s economic slowdown dragged on the island’s exports.

Gross domestic product fell 0.28 percent in the three months through December from a year earlier, according to preliminary data released by the statistics bureau Friday. That compares with a 0.6 percent drop projected by the median estimate in a Bloomberg survey of economists and the 0.63 percent decline in the third quarter. The economy grew 0.85 percent in 2015.

Taiwan’s exports shrank last year as local manufacturers grappled with the double whammy of slower economic growth in their top market China and tougher competition from mainland rivals. It wasn’t all bad news though: The economy grew 3.22 percent at a seasonally adjusted annualized rate, the most since the third quarter of 2014, as lower crude prices helped consumers.

"This confirms the economic cycle hit the trough in the third quarter," said Cary Ku, an economist at Jih Sun Securities Co. in Taipei. "The central bank cut rates in the fourth quarter to stimulate market confidence, but as growth bottoms out, I expect it to hold rates unchanged for the whole year."

Economists are split over whether the authority will lower the benchmark rate when it meets in March, according a survey of analysts by Bloomberg News.

President-elect Tsai Ing-wen, having defeated the ruling party’s candidate in a landslide in this month’s election, will face the challenge of boosting economic growth amid weaker global demand and stiffer competition in electronics, Taiwan’s main export. Tsai will succeed President Ma Ying-jeou in May.

Domestic consumption grew 1.64 percent last quarter, compared with 0.5 percent in the prior period and 2.81 percent a year ago. While both shares and home prices fell last year, lower crude prices helped consumers in the oil-importing economy save some cash.

"A more positive signal is consumer confidence bottomed out in September," said Achilles Chen, an economist at Cathay Financial Holding Co. in Taipei, ahead of the release. "The drop in oil also boosts consumption."

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