TAIPEI—Taiwan emerged from a half-year of economic contraction in the first quarter, as expected, but an uncertain outlook for its major trading partners—China, the U.S. and Europe—and a rising local currency prompted the government to trim its export and economic growth forecasts for the year.
Taiwan's first-quarter gross domestic product rose 0.26% from the fourth quarter, snapping two straight quarters of contraction, according to an advance estimate from the Directorate General of Budget, Accounting and Statistics released Monday.
On an annual basis, the export-reliant economy expanded 0.36% in the first quarter, much below the 1% growth the market expected.The government now expects GDP will grow 3.38% this year, less than the 3.85% growth previously estimated.
Exports will likely grow 4.3%, less than the 4.87% rise expected earlier. Consumer prices will probably rise 1.94% this year, up from the 1.46% increase previously expected, after the government withdrew its decade-long subsidies on fuel and electricity in early April.
Taiwan derives about two-thirds of its GDP from exports of electronics products and components, flat panels and petrochemicals.
First-quarter exports, in value terms, dropped 4% from a year earlier, the worst reading in more than two years, as the island shipped fewer handsets, personal computers and televisions.
Both the government and economists expect Taiwan's exports to resume growth later this year as the expected launch of a next-generation iPhone and the Windows 8 operating system in the second half will bring in more orders for Taiwanese manufacturers.
But the government warned Monday the recent strength of the New Taiwan dollar against the U.S. dollar may jeopardize already-fragile economic growth.
Rising inflationary expectations have pushed the New Taiwan dollar up over 3.5% against the U.S. dollar so far this year, more than the 2.6% gain for the whole of 2011. ANZ economist Raymond Yeung said Taiwan "appears to be far less vulnerable to the European debt crisis" than during the global tech bubble in 2000-2001.
He now expects GDP to grow 3.97% this year, higher than the government's latest forecast.
With economic activity data picking up more firmly in the second quarter, policy makers may start hiking rates in the third quarter to avoid possible negative real interest rates, Yeung said. HSBC economist Donna Kwok said "risks for global growth remain tilted firmly to the downside" but Taiwan's economy had probably hit its bottom in the first quarter.
wsj.com
Taiwan's first-quarter gross domestic product rose 0.26% from the fourth quarter, snapping two straight quarters of contraction, according to an advance estimate from the Directorate General of Budget, Accounting and Statistics released Monday.
On an annual basis, the export-reliant economy expanded 0.36% in the first quarter, much below the 1% growth the market expected.The government now expects GDP will grow 3.38% this year, less than the 3.85% growth previously estimated.
Exports will likely grow 4.3%, less than the 4.87% rise expected earlier. Consumer prices will probably rise 1.94% this year, up from the 1.46% increase previously expected, after the government withdrew its decade-long subsidies on fuel and electricity in early April.
Taiwan derives about two-thirds of its GDP from exports of electronics products and components, flat panels and petrochemicals.
First-quarter exports, in value terms, dropped 4% from a year earlier, the worst reading in more than two years, as the island shipped fewer handsets, personal computers and televisions.
Both the government and economists expect Taiwan's exports to resume growth later this year as the expected launch of a next-generation iPhone and the Windows 8 operating system in the second half will bring in more orders for Taiwanese manufacturers.
But the government warned Monday the recent strength of the New Taiwan dollar against the U.S. dollar may jeopardize already-fragile economic growth.
Rising inflationary expectations have pushed the New Taiwan dollar up over 3.5% against the U.S. dollar so far this year, more than the 2.6% gain for the whole of 2011. ANZ economist Raymond Yeung said Taiwan "appears to be far less vulnerable to the European debt crisis" than during the global tech bubble in 2000-2001.
He now expects GDP to grow 3.97% this year, higher than the government's latest forecast.
With economic activity data picking up more firmly in the second quarter, policy makers may start hiking rates in the third quarter to avoid possible negative real interest rates, Yeung said. HSBC economist Donna Kwok said "risks for global growth remain tilted firmly to the downside" but Taiwan's economy had probably hit its bottom in the first quarter.
wsj.com
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