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Last updated: May 21, 2009 11:46 pm
Taiwan's economy shrank by a record 10.24 per cent in the first quarter of this year as exports continued to plummet, but officials said yesterday the worst of the economic crisis is now over for the export-oriented island.
The drop in GDP represented Taiwan's biggest decline in output since records began in 1961, and was worse than the 6.51 per cent fall forecasted by the government in February. On a quarter-on-quarter basis, Taiwan's economy contracted at an annualised rate of 19.36 per cent.
Taiwan occupies a central role in the global supply chain for electronics, computers and other high-tech goods and the latest economic figures highlight the sharp decline in consumer demand for such goods as a result of the global economic crisis.
“The decline in international economic conditions in the first quarter far exceeded expectations . . . [but] this is the bottom of the current economic adjustment” the Directorate-General of Budget, Accounting, and Statistics said in a statement.
Taiwan's government now expects the economy to grow slightly in the second quarter compared to the first and for that pace to pick up to a quarter-on-quarter increase of 7.66 per cent in the third quarter.
Enoch Fung, Goldman Sachs economist, said Taiwan's economic prospects are also brightened by closer ties with China, which would allow “Taiwan to better capitalize on the recovery in China’s growth recovery”.
Taiwan and China have made several breakthroughs in improving relations over the past month, including agreeing to cooperate on financial issues and for Taiwan to open certain businesses to Chinese investment. Optimism for even closer ties have helped make Taiwan's stock market one of Asia's best performers this year.
Yesterday's data, however, show just how dire Taiwan's economic situation remains. They have prompted the government to revise its full-year GDP growth forecast from -2.97 to -4.25 per cent, making 2009 more than twice as bad economically for Taiwan as 2001, when it suffered from the aftermath of the dotcom bubble.
Tsai Hung-kun, director of the statistics bureau, said the majority of the economic decline was due to falling exports. Taiwan's exports for the first three months of this year were 36.6 per cent less compared to last year.
“The most important factor for recovery remains an improvement in exports,” Mr Tsai said. Government spending, however, will also provide a lift. Taipei's stimulus package, which includes T$149bn in infrastructure spending this year, is expected to contribute nearly 3 per cent in GDP growth this year.
Taiwan's exports had improved on a monthly basis in the first three months of this year but that trend was broken in April, which saw a slight decline in exports compared to March and was a third less than a year ago.
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