Taiwan Economy Shrinks 0.9% On Weaker Exports, Worst Contraction In 13 Years

Taiwanese economy contracted the most in thirteen years as export demand was impacted by the Covid pandemic related woes in China, advance estimates by the Directorate General of Budget, Accounting & Statistics, or DGBAS, revealed on Wednesday.

Gross domestic product, or GDP, fell 0.86 percent year-on-year in the December quarter, reversing a 4.01 percent increase in the September quarter.

Further, this was the worst economic downturn since the third quarter of 2009, when GDP shrank 1.13 percent.

On a quarter-on-quarter seasonally-adjusted annualized basis, GDP fell 4.24 percent, in contrast to the 7.51 percent contraction a quarter ago.

The contraction in the fourth quarter was largely driven by a 5.09 percent decline in exports of goods and services, which was due to the weakening global demand and inventory adjustment. Imports also showed a negative growth, down 1.61 percent annually.

Read more: Taiwan Exports Fall Most In Nearly 7 Years

Among other expenditure components, private final consumption grew 2.89 percent from last year, led by the recovery in consumption activities such as dining out, recreation and transportation. This was partly offset by the decrease in financial services.

Government consumption rose 3.14 percent, while gross capital formation increased just 0.03 percent.

The DGBAS had cut real GDP growth growth forecast for 2022 to 3.06 percent and forecast expansion of 2.75 percent in 2023.

In December, Taiwan’s central bank assessed that although the domestic economy was boosted by the diminished impact of the domestic pandemic waves and a gradual lifting of lockdown restrictions in recent months, weaker global final demand and ongoing inventory destocking hampered exports.

The bank had predicted a sharp slowdown in growth in the fourth quarter, as evident from the latest data.

The central bank downgraded its forecast of Taiwan’s GDP growth rate to 2.91 percent for the year 2022 as a whole and projected a moderation in the rate of economic expansion to 2.53 percent this year.

The bank raised its benchmark discount rate four times last year, but has signaled an end to the current round of policy tightening this year, as policymakers expect inflation to ease below 2.0 percent and the economic growth rate to slow amid global woes.

Read more: Taiwan Inflation Rises To 2.71%

Separate official data showed that the seasonally adjusted jobless rate dropped to 3.61 percent in December from November’s stable rate of 3.64 percent.

There were 428,000 unemployed people in December versus 431,000 people in the prior month.

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