Taiwan’s Economic Decline Probably Slowed on Exports to China
Taiwan’s economy probably shrank at a slower pace in the second quarter as exports to China improved, indicating the island may be recovering from its first recession since 2001.
Gross domestic product contracted 7.8 percent in the three months through June, according to the median estimate in a Bloomberg News survey of 17 economists, after declining a record 10.24 percent the preceding quarter. The report is due to be released at 5 p.m. local time and will include a forecast on the impact of the typhoon that struck the nation earlier this month.
“Taiwan’s economy is mainly export-driven and it is largely affected by the economic outlook in China and nearby countries,” said Ma Tieying, an economist at DBS Bank in Singapore. “We expect Chinese demand to help boost exports growth in the second-half.”
The easing in Taiwan’s economic decline, led by companies including Taiwan Semiconductor Manufacturing Corp., comes as South Korea, China and Singapore lead a regional rebound. The island was battered Aug. 6-9 by its deadliest typhoon in 50 years, with at least 136 people killed.
Taiwan’s electronics producers send parts to China that are re-exported as finished computers, televisions and mobile phones to consumers in the U.S. and Europe.
Second-quarter sales at Taiwan Semiconductor, the world’s largest custom chipmaker, climbed 88 percent from the previous quarter to NT$74.21 billion ($2.25 billion), boosted by overseas demand. June sales at Quanta Computer, the world’s largest maker of notebook computers, climbed 34 percent from a month earlier.
Stocks Rise
The benchmark Taiex index has surged 48 percent this year on optimism that the Chinese government’s stimulus, coupled with Taiwan’s closer relations with the mainland, mean the worst may be over for the economy.
Emerging economies, led by China, will pick up later this year and help the world recover from the worst slump since World War II, the International Monetary Fund said in a July 8 report.
Taiwan’s shipments to China, its biggest overseas market, fell 21 low cost car insurance.5 percent in July from a year earlier, compared with a drop of 38.1 percent in the first seven months. Total exports, which account for more than two-thirds of Taiwan’s economy, fell 24.4 percent in July, slowing from a 30.4 percent slump in June.
To help revive Taiwan’s economy, the government plans NT$858.5 billion of spending over four years, equivalent to about 6 percent of GDP, on infrastructure, consumer grants and tax cuts. It handed out NT$82.9 billion of shopping vouchers in January, which the statistics bureau says added 0.66 percentage point to GDP.
Interest Rates
The central bank in June kept interest rates unchanged at a record low 1.25 percent for a second meeting. Governor Perng Fai-nan and his board have cut rates by 2.125 percentage points since Sept. 25.
The central bank is likely to hold interest rates for the rest of year as there is no immediate risk of inflation, DBS Bank’s Ma said. “The economy is recovering but it hasn’t gone back to the level before the financial crisis,” he said.
Taiwan’s President Ma Ying-jeou, who is suffering in opinion polls over his handling of relief efforts following Typhoon Morakot, said yesterday the storm is likely to hurt third-quarter growth.
Morakot caused losses of NT$110 billion, including NT$13.4 billion in agricultural damage, after it dumped record rainfall on Taiwan, leaving 386 missing as landslides buried villages and destroyed bridges and roads, mainly in the south.
“August output will suffer and headline inflation may temporarily spike,” said Tony Phoo, an economist at Standard Chartered based in Taipei. “However economic losses should be limited.”
He said he expects typhoon-related output losses and damage to reduce third-quarter economic growth by about 1 percentage point, though this should be offset by additional reconstruction investment, which may boost growth over the medium term.
Filed under: money by Finance Boss