Analysts think Taiwan economy shrank in Q3

> Poll forecasts 0.6% contraction on export slump amid China slowdown and weaker global demand

TAIPEI: Taiwan’s economy is expected to have contracted for the first time in six years in the third quarter, as the island’s major export manufacturers stumble amid a slowdown in China and slackening global demand.

Taiwan’s July-September gross domestic product is forecast to have shrunk 0.6% from the same period a year earlier, a Reuters poll of 15 analysts showed, which would be the first year-on-year contraction since the depths of the global financial crisis in 2009. The economy grew 0.52% on-year in the second quarter.

The risk of a recession also appears a touch-and-go affair, with analysts split on whether the economy contracted on a quarterly basis after GDP slumped 6.56% in the April-June quarter from the previous three months on a seasonally adjusted annualised rate.

“The general economic profile remains vulnerable,” ANZ economists said in a recent note.

“A broader and more sustainable growth will still rely on the recovery of mainland China, Taiwan’s largest trade partner.”

A key supply-chain hub for high-tech products, Taiwan’s exporters have been badly exposed to the downturn in global demand with manufacturers that contract for global titans such as Apple Inc and Hewlett-Packard Co taking a hit.

The collapse in shipments has craved off a big chunk of economic output – an all too familiar scene across regional economies with exposure to struggling China.

The world’s largest contract chipmaker Taiwan Semiconductor Manufacturing Co, for instance, slashed its capital spending for this year by around 20% earlier this month due to weaker than expected demand.

“We need to continue to monitor the demand situation,” Peter Shen, chief financial officer of memory chipmaker Inotera Memories Inc, said on Tuesday during the firm’s quarterly earnings conference.

Inotera, which is Micron Technology Inc’s joint venture in Taiwan and produces all its chips for the US tech firm, will have depressed average selling prices in the current quarter, Shen said.

Some analysts expect economic growth for the year to slow to a six-year low of around 1%, sharply lower from last year’s 3.77% that was partly driven by record demand for Apple’s signature smartphones.

Shipments in September slumped over 14%, led by a 17.1% plunge in exports to China. But export orders – considered a leading indicator for exports two to three months ahead – declined at a slower pace last month, raising hopes year-end holiday demand could help stabilise shipments.

Last month, Taiwan’s central bank cut its policy rates for the first time since the global financial crisis to shore up flagging confidence. – Reuters