Taiwan's Economy Slumps in Fourth Quarter

Taiwan's economy shrank at a record pace of more than 8 percent in the fourth quarter, reflecting its exposure to the brutal slump in global demand and pushing the island into recession, sources said on Wednesday.

CNBC.com

Taiwan joins a list of export-reliant Asian economies that are shrinking rapidly because the global crisis has knocked the major centres that buy the region's goods, including the United
States, Europe and Japan, into recession.

Analysts said the slump could prompt further efforts by Taiwan's policy makers to support the ailing economy, especially since the outlook remained bleak in the absence of any sign that world demand is improving.

"Surely, the first quarter will be worse," said Grace Ng, an economist at JP Morgan. "The major drag has been on the external demand side and therefore on industrial production."

Taiwan financial markets held steady after the GDP news.

A source close to the Taiwan government said gross domestic product, the broadest measure of economic performance, slumped 8.36 percent in the fourth quarter from a year earlier. 

Another source close to the government confirmed the drop was a record and was more than 7 percent, but did not give a specific figure.

That was steeper than expected in a Reuters poll, which produced a median forecast for a decline of 5.6 percent. Official data is due to be published later on Wednesday.

Earlier this week, Japan reported its economy shrank 4.6 percent in the October-December quarter from a year earlier. South Korea's GDP fell 3.4 percent and Singapore's economy contracted 2.6 percent.

Taiwan is heavily exposed to the global technology chain as it is home to the world's two biggest micro-chip makers, TSMC and UMC.

It produces about 80 percent of the world's laptop computers and more than 40 percent of its liquid crystal displays (LCDs), used in popular flat-screen TVs.

Taiwan's exports fell in both December and January at record rates over the corresponding year-earlier periods. January's figures included a record fall in demand from China, which has
also seen a sharp slowdown in growth.

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The latest data showed that Taiwan's economy contracted for a second straight quarter. It shrank in the third quarter by a preliminary 1.02 percent from a year earlier.

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