Recession hits Taiwan’s economy

Taiwan’s economy has fallen into recession with its GDP plummeting by 3.02% in the first quarter, according to advance estimates released by the Taiwanese government’s statistics bureau. This is the steepest decline since the global financial crisis and worse than the Bloomberg survey of economists’ estimated 1.25% drop. It marks the second straight quarter of decline, highlighting the difficult outlook for the trade-dependent economy as global demand for its products continues to wane.

The latest figures contrast with other export economies in the region. South Korea’s GDP grew by 0.3% in the first quarter, while China’s economy expanded by 4.5%, fuelled by surging consumption. Taiwan’s struggle to rediscover growth comes as the island’s exporters battle with falling overseas demand for their products, compounded by a shortfall of workers willing to take jobs in the services industry, further hampering domestic demand.

Taiwan Semiconductor Manufacturing Co. warned last week that the second quarter would likely be the bottom of the current business cycle before demand recovers later in the year. The shortfall in global demand for chips has shown little sign of abating. An economist at United Overseas Bank Ltd. in Singapore said, “Taiwan is in a technical recession,” adding that GDP was dragged down by export and investment figures. Even with a pickup in momentum over the next three quarters, GDP will see “only marginal growth for the full year.”

Despite the lacklustre performance of the export sector, Wu Pei-hsuan, a senior executive officer at Taiwan’s statistics bureau, said Taiwan is still supported by strong private consumption. However, the economy’s dependence on exports, particularly China, raises questions about its reliance on a single market. Taiwan’s situation is also aggravated by the island’s export structure, with about 70% of its exports being intermediate goods and components, rather than finished goods.