Taiwan GDP to contract 2.97%

The pessimistic prediction came after the domestic economy contracted by an estimated 8.36 percent in the fourth quarter of 2008, the largest-ever quarterly drop in history.

DGBAS forecasts the island's GDP will continue contracting in the first three quarters of this year, shrinking 6.51 percent in the first quarter, 6.85 percent in the second quarter, and 2.67 percent in the third quarter. By contrast, the GDP growth of 4.5 percent will be seen in the fourth quarter.

If the DGBAS's predictions prove accurate, then it would be the first time the domestic economy contracted for five consecutive quarters. DGBAS yesterday revised GDP growth figures for the third quarter of 2008 to -1.05 percent from -1.02 percent, and estimated a sharp contraction of 8.36 percent for the fourth quarter.

Accordingly, preliminary statistics show that Taiwan's GDP edged up only 0.12 percent for the entire year of 2008, the lowest since 2001, when the nation's economic growth was at -2.17 percent.

The DGBAS also estimated that the consumer price index (CPI) grew 3.53 percent in 2008, and per capita gross national product (GNP) was US$17,576.

For this year, the DGBAS predicted that the annual CPI would decline by 0.82 percent, and per capita GNP would shrink to US$15,957.

With a revision in third quarter GDP estimates to minus 1.05 percent, Taiwan's economy is officially in a recession, traditionally defined as two straight quarters of contraction.

This was the first time the government agency forecast negative growth for Taiwan's GDP in 2009, and follows even more pessimistic predictions by foreign investment firms which predict that the nation's economy would shrink by between 6 percent and 11 percent.

The annual GDP revision came after two consecutive months during which exports tumbled more than 40 percent. DGBAS had forecast that gross domestic product would grow 2 percent in 2009.

The last time the Taiwanese economy contracted for a full year was in 2001 when the dot.com bubble burst, battering the island's technology industry.

Taiwan's economy is extremely dependent on overseas sales, particularly to China, where scores of electronics factories assemble Taiwan-made components for onward export to the U.S. and other foreign markets. Many of those factories are cutting back in the wake of the worldwide economic crisis.

Asian economies.

Shih Su-mei, director general of the DGBAS, told a press conference that the global financial tsunami has dealt a much heavier blow than the Asian financial crisis in 1997 and the dot.com bubble burst in 2001 to the domestic economy, and therefore it would take a longer time for the economy to get back on its normal growth track.

Shih continued that the global economic downturn has seriously undermined Taiwan's export trade as well as industrial production and private investments, thus causing the nation's economy to suffer its largest quarterly decline of 8.36 percent in the fourth quarter of 2008.

The DGBAS chief forecast that Taiwan's exports would plunge by 20.10 percent and imports would plummet by 26.20 percent this year, with a foreign trade surplus of US$26.3 billion in favor of Taiwan.

Private spending is estimated to edge up by 0.82 percent, but the fixed investments made by the government, state-run enterprises and private firms would fall by 17.76 percent. 

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