Taiwan
Taiwan's economic growth probably slowed in the fourth quarter from the fastest pace in three years as consumer spending cooled and exports to the U.S. eased.
Gross domestic product rose 5.65 percent from a year earlier, moderating from the third quarter's 6.92 percent gain, according to the median estimate of 14 economist surveyed by Bloomberg News. The report is due about 5 p.m. in Taipei today.
A U.S. economic slump is spreading and damping demand for Taiwan's electronics exports just as rising living costs and falling share prices curb spending by the island's consumers and companies. Slower growth may fuel speculation the central bank will cease raising interest rates after 14 consecutive increases.
“Taiwan appears more exposed than most economies in Asia to the downturn in the U.S. economy,'' said Frederic Neumann, an economist at HSBC Global Markets in Hong Kong. “For 2008, the economy is likely to decelerate to a pace of 4 percent, largely on account of plunging export growth.''
Neumann forecasts the central bank will keep borrowing costs unchanged for the next six months.
The Taiex index of shares rose 1 percent to 7,972.13 at 9:11 a.m. in Taipei. The index has dropped 6.3 percent this year.
Standard Chartered Bank Plc, UBS AG and Goldman Sachs Group Inc. all cut their forecasts last month for Taiwan's GDP growth in 2008. The island's expansion will slow to 4.2 percent this year from 5.5 percent in 2007, according to the median estimate in this week's Bloomberg survey.
`Export-led Slowdown'
Export growth cooled more than economists expected in January as customers in the U.S. and Japan bought fewer electronic goods. Overseas shipments are equivalent to about 50 percent of Taiwan's economy.
“There is mounting evidence that the region's economies are about to enter an export-led slowdown,'' Rob Subbaraman, chief Asia economist at Lehman Brothers Holdings Inc. in Hong Kong, wrote in a report.
“Asian central banks face a growing dilemma of whether to respond to slowing growth or rising inflation,'' he wrote. “We expect them to focus more on growth.''
Taiwan's central bank has raised the discount rate on 10- day loans to banks at each of its past 14 quarterly meetings, to help damp inflation and curb an outflow of capital. It increased the benchmark rate to 3.375 percent on Dec http://payday-faxless.com. 20.
Policy makers will keep the rate unchanged in March, according to Tony Phoo, an economist at Standard Chartered.
Slower Growth
“Fourth-quarter GDP data should reinforce our view that Taiwan is probably at the peak of current expansionary cycle,'' Phoo said in Taipei. “This is especially so when we look at the latest trade data where exports to the U.S. actually declined.''
Spending by Taiwan's consumers probably cooled in the fourth quarter as rising fuel and food costs coupled with slumped share prices damped confidence. The Taiex index fell 10.2 percent in the final three months of 2007, following the third quarter's 6.7 percent gain.
The contribution to growth from net exports shrank to 2.7 percentage points in the fourth quarter compared with 3.1 points in the third quarter, according to a statistics bureau estimate.
Shipments to the U.S. dropped 0.9 percent in the whole of 2007. The U.S. buys 13 percent of Taiwan's total exports.
Taiwan's sales to China, the world's fastest growing major economy, have helped compensate for the U.S. slowdown. There was a 12.6 percent increase in goods bound for China and Hong Kong combined last year.
Chinese Links
China, which regards Taiwan as one of its provinces, has increasing trade and investment links with the island in spite of a ban on direct transport across the 100-mile Taiwan Strait that separates them.
The island's growth “has large upside potential if closer economic links with mainland China can be developed after elections in March,'' Lehman's Subbaraman wrote.
Taiwanese will vote for a new president on March 22.
Ma Ying-jeou, leader of the opposition Kuomintang party, has pledged to lower tensions with China and ease restrictions on Taiwanese investments in the mainland.
Ma leads his rival Frank Hsieh of the Democratic Progressive Party in opinion polls, and the KMT routed the DPP in Jan. 12 parliamentary elections.
“While the global economic downturn may drag Taiwan's GDP growth down to 3.9 percent in 2008, it could easily rebound to 5.7 percent in 2009 if cross-strait economic relations improve,'' Subbaraman said.
Filed under: legal, management by Finance Boss