Tai­wan falls into re­ces­sion, posts slow­est growth in 6 years

The Pak Banker - - MARKETS/SPORTS -

Tai­wan sank into re­ces­sion in Oc­to­ber-De­cem­ber, data showed Fri­day, post­ing its slow­est an­nual growth in six years, with weak in­ter­na­tional de­mand and greater com­pe­ti­tion from China hit­ting the ex­port-de­pen­dent is­land.

The growth rate of 0.85 per­cent in 2015 missed an ear­lier of­fi­cial fore­cast of 1.06 per­cent. The full-year fig­ure was dragged down by an un­ex­pected con­trac­tion in the three months through De­cem­ber, the se­cond straight quar­ter of de­clines that meets the def­i­ni­tion of a tech­ni­cal re­ces­sion. "In­ven­to­ries of elec­tronic prod­ucts con­tinue to be di­gested, af­fected by weak global growth," the Di­rec­torate Gen­eral of Bud­get, Ac­count­ing and Sta­tis­tics said in a state­ment.

It also cited the rise of tech­nol­ogy man­u­fac­tur­ing -- a key sec­tor for Tai­wan -- in China and de­clines in raw ma­te­ri­als as fac­tors for the strug­gling econ­omy.

Tai­wan's eco­nomic woes come as China's econ­omy last year slowed to 6.9 per­cent, its weak­est an­nual rate in 25 years. China is Tai­wan's big­gest ex­port mar­ket, ac­count­ing for a quar­ter of prod­ucts shipped. Ex­ports fell by a 10th last year, with sales to China drop­ping 12.3 per­cent from the pre­vi­ous year.

The govern­ment has been try­ing to spur the econ­omy, cut­ting its key in­ter­est rate twice in the last two quar­ters and push­ing a stim­u­lus pack­age to boost con­sumer spend­ing.

Tai­wanese frus­trated at the anaemic econ­omy this month elected Tsai Ing-wen from the main op­po­si­tion party as the is­land's new leader, set­ting the stage for frostier ties with the main­land.

Cur­rent pres­i­dent Ma Ying-jeou, who was elected on a plat­form of greater en­gage­ment with China, has seen his pop­u­lar­ity hit record lows due to his poli­cies fail­ing to trans­late into higher salaries and bet­ter job prospects.

Econ­o­mists are split over whether the au­thor­ity will lower the bench­mark rate when it meets in March, ac­cord­ing a sur­vey of an­a­lysts by Bloomberg News.

Pres­i­dent-elect Tsai Ing-wen, hav­ing de­feated the rul­ing party's can­di­date in a land­slide in this month's elec­tion, will face the chal­lenge of boost­ing eco­nomic growth amid weaker global de­mand and stiffer com­pe­ti­tion in elec­tron­ics, Tai­wan's main ex­port. Tsai will suc­ceed Pres­i­dent Ma Ying-jeou in May.

Do­mes­tic con­sump­tion grew 1.64 per­cent last quar­ter, com­pared with 0.5 per­cent in the prior pe­riod and 2.81 per­cent a year ago. While both shares and home prices fell last year, lower crude prices helped con­sumers in the oilimport­ing econ­omy save some cash.

"A more pos­i­tive sig­nal is con­sumer con­fi­dence bot­tomed out in Septem­ber," said Achilles Chen, an econ­o­mist at Cathay Fi­nan­cial Hold­ing Co. in Taipei, ahead of the re­lease.

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