Eco­nomic growth in Q2 slows to 0.64%

Rise greatly misses forecast of 3.37 per­cent as ex­ports plunge

The China Post - - FRONT PAGE -

Tai­wan’s econ­omy grew at its slow­est pace in three years in AprilJune, data showed yesterday, ham­mered by a plunge in its key ex­port sec­tor and fall­ing de­mand in China.

The re­sults un­der­score the chal­lenge Taipei faces in di­ver­si­fy­ing from its tra­di­tional main­stays of elec­tron­ics and hard­ware ex­ports, as it tries to en­cour­age tech in­no­va­tion from smaller home­grown busi­nesses as a way to boost the econ­omy.

Growth came in at just 0.64 per­cent year on year in the sec- ond quar­ter, sharply down from 3.37 per­cent in the pre­vi­ous three months and badly miss­ing a forecast of 3.05 per­cent, the Di­rec­torate Gen­eral of Bud­get, Ac­count­ing and Sta­tis­tics (DGBAS) said.

Com­pared with the pre­vi­ous three months, the econ­omy shrank 7.65 per­cent.

Ex­ports fell 9.81 per­cent as in­ven­tory of elec­tronic prod­ucts re­mained high and main­land China ex­panded sup­ply chains within the main­land.

The soft read­ing came de­spite a 2.81-per­cent rise in pri­vate con- sump­tion, which beat ex­pec­ta­tions of a 2.75 per­cent in­crease.

DGBAS Ex­pects 2.68% Growth

for 2015

Wang Shu-chuan, a spe­cial­ist with the DGBAS, said that if the agency only took into ac­count the weaker- than- ex­pected sec­ondquar­ter GDP growth, Tai­wan’s econ­omy could be ex­pected to grow 2.68 per­cent in 2015, lower than an ex­pan­sion of more than 3 per­cent forecast by both the gov­ern­ment and ma­jor think tanks.

But the ac­tual re­sult will de­pend on how the econ­omy per­forms in the sec­ond half of this year, she said.

In May, the DGBAS cut its forecast for Tai­wan’s GDP growth in 2015 to 3.28 per­cent from a previ- ous es­ti­mate of 3.78 per­cent, cit­ing slower ex­ports and pri­vate con­sump­tion growth.

The DGBAS will up­date its forecast on Aug. 14.

Wang said the global econ­omy showed signs of slow­ing down in the sec­ond quar­ter as de­mand ap­peared to weaken, and in­ven­to­ries in the elec­tron­ics in­dus­try re­mained high, hurt­ing Tai­wan’s ex­ports, the back­bone of the coun­try’s econ­omy.

Wang said main­land China’s ef­forts to build its own sup­ply chain in the man­u­fac­tur­ing sec­tor also com­pro­mised de­mand for prod­ucts from Tai­wan in the April-June pe­riod.

Need for Eco­nomic Sup­port

An­a­lysts warned that the news high­lights the need for the gov­ern- ment to in­tro­duce mea­sures to sup­port the econ­omy as it faces a gen­eral elec­tion in early 2016.

“It’s not only cycli­cal ... there are also struc­tural fac­tors,” said Wai Ho Leong, an economist at Bar­clays based in Sin­ga­pore.

China’s in­creas­ing use of do­mes­ti­cally pro­duced goods “has re­duced de­mand for Tai­wan-made com­po­nents,” he added.

Bar­clays had orig­i­nally pre­dicted three per­cent growth for the sec­ond quar­ter and Leong said he was look­ing to re­vise his full-year GDP forecast af­ter an “un­usu­ally de­pressed” first half of 2015.

Tra­di­tion­ally an ex­port-driven tech­nol­ogy hub, Tai­wan has ben­e­fited from Ap­ple’s new iPhone 6, which launched last year — a num­ber of lead­ing Tai­wanese firms such as Fox­conn and Tai­wan Semi­con­duc­tor Man­u­fac­tur­ing Co. are re­port­edly among Ap­ple’s sup­pli­ers.

But the gov­ern­ment in May low­ered its growth forecast for this year to 3.28 per­cent from 3.78 per­cent, blam­ing in­creased com­pe­ti­tion from China in the tech in­dus­try.

China has been push­ing to grow its own tech in­dus­try with the de­vel­op­ment of do­mes­tic smart­phone brands and home­grown hard­ware, in­clud­ing chips.

TSMC, the world’s big­gest con­tract mi­crochip maker, said ear­lier this month it had “mod­est” ex­pec­ta­tions for the third quar­ter as de­mand for smart­phones slow in emerg­ing mar­kets and China.

The gov­ern­ment’s ex­ec­u­tive branch, known as the Ex­ec­u­tive Yuan, put for­ward broad mea­sures on Mon­day to counter Tai­wan’s weak­en­ing econ­omy, in­clud­ing greater in­no­va­tion to raise com­pet­i­tive­ness in in­dus­tries threat­ened by China’s home­grown sup­pli­ers and en­cour­age do­mes­tic in­vest­ments.

“Tak­ing a mid to long term view, we need to ac­cel­er­ate the up­grad­ing of our in­dus­tries, strengthen in­vest­ments and en­hance ex­port com­pet­i­tive­ness, to con­tinue the push for the econ­omy’s struc­tural shift,” Premier Mao Chi-kuo of the Ex­ec­u­tive Yuan said.

It comes at a time when eco­nomic stag­na­tion and a lack of job and hous­ing op­por­tu­ni­ties for younger gen­er­a­tions are putting pres­sure on the rul­ing Kuom­intang party ahead of pres­i­den­tial elec­tions in Jan­uary 2016.

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