Taiwan Economy Shrank in First Quarter as Weak Exports Dragby and
First-quarter GDP contracts 0.84%, worse than estimates
Exports have posted double-digit declines in last 10 months
Taiwan’s economy contracted on a yearly basis for a third straight quarter as an export slump showed no signs of abating, adding urgency to President-elect Tsai Ing-wen’s pledge to revive growth when her term begins next month.
Gross domestic product fell 0.84 percent in the three months through March from a year earlier, according to preliminary data released by the statistics bureau Friday. That compares with a 0.65 percent drop projected by the median estimate in a Bloomberg survey of economists and the 0.52 percent decrease in the third quarter.
Taiwan’s exports have posted double-digit declines in the past 10 months amid slower growth in their top destination China and waning demand for electronics, a key product for the island. Weakness in exports is also curbing wage growth and domestic consumption, outweighing government efforts to cushion the slowdown.
“The government increased its spending in the first quarter,” said Rick Lo, senior economist at Fubon Financial, who sees the central bank cutting interest rates as many as three more times from June’s meeting. “To have the first quarter contract more than expected shows the problem with the economy is very serious.”
Capital formation slumped 2.48 percent from a year ago, the most in at least two years, as construction slowed and electronics firms reduced inventory, according to the statistics bureau. Consumption grew 1.84 percent, the most since the second quarter of last year but still below the last three years’ annual rates, while government spending jumped.
The manufacturing and construction industries were the worst performers.
As global trade slows, the incoming president has proposed developing industries such as biotechnology and smart machinery. The central bank is also expected to help resuscitate growth by cutting the policy rate for a fourth straight quarter in June, according to economists surveyed by Bloomberg.