(Updates with economist’s comment in fourth paragraph.)
Jan. 31 (Bloomberg) -- Taiwan’s economy expanded at the slowest pace in more than two years, putting pressure on the government to bolster growth and giving the central bank more reason to extend an interest-rate pause.
Gross domestic product rose 1.9 percent in the three months through December from a year earlier and contracted from the previous quarter, pushing the economy into a technical recession, according to preliminary data from the statistics bureau. The median estimate of nine economists in a Bloomberg News survey was for a 2.8 percent expansion from a year ago.
President Ma Ying-jeou, who won re-election on Jan. 14, has promoted Vice Premier Sean Chen, a former deputy finance minister, to the post of premier in a sign he plans to focus on reviving growth in the island in his second term. Europe’s sovereign-debt crisis is hurting Asian exporters from Singapore to South Korea, and policy makers have either cut borrowing costs or refrained from further increases in recent meetings.
“At a time when global growth is slowing, Taiwan needs domestic demand to offset the decreasing exports,” Frances Cheung, a Hong Kong-based strategist at Credit Agricole CIB, said after the report. “The new government should boost fiscal spending to stimulate the weak domestic consumption.”
Taiwan’s central bank will keep the discount rate on 10-day loans to banks unchanged at 1.875 percent through the middle of next year, according to a Bloomberg News survey.
The benchmark Taiex stock index ended 1.5 percent higher before the data. It lost 21 percent last year, the worst decline since 2008.
The economy contracted 0.25 percent last quarter from the prior three months, shrinking for a second successive quarter and pushing the economy into a technical recession, today’s report showed.
GDP grew 4.03 percent in 2011, compared with the 4.51 percent pace forecast by the statistics bureau earlier. The agency cut the forecast for this year to 3.91 percent from 4.19 percent previously.
Inflation in 2012 may be 1.29 percent, it said, compared with an earlier projection of 1.14 percent. Exports may grow 4.97 percent this year, compared with a previous estimate of 5.27 percent, the statistics bureau said.
Overseas sales, which are equivalent to about two-thirds of Taiwan’s economy, rose at the slowest pace in 26 months in December. Export orders, an indication of shipments in the next one to three months, fell last month for the first time since 2009 as demand from China and Japan declined.
“Faltering external demand proved to be a considerable drag on investment, and hence GDP growth,” Raymond Yeung, a senior economist in Hong Kong at Australia & New Zealand Banking Group Ltd., said after the report. “But I don’t think the trend will continue in 2012. Political uncertainties have waned on this month’s re-election of the ruling party.”
Slowing overseas demand is already affecting Taiwan’s manufacturers and the nation’s job market.
HTC Corp., Asia’s second-largest smartphone maker, this month reported its first quarterly profit decline in two years. Nanya Technology Corp. and Inotera Memories Inc., Taiwan’s second- and third-largest memory-chip makers, reported their eighth quarter of losses as slowing demand for personal computers pushed down prices.
A total of 91 companies reached agreements with 11,630 workers to take leave without pay as of Jan. 15, the Council of Labor Affairs said this month.
--With assistance from Ailing Tan in Singapore and Adela Lin, Andrea Wong, Tim Culpan and Yu-Huay Sun in Taipei. Editors: Rina Chandran, Stephanie Phang
To contact the reporter on this story: Chinmei Sung in Taipei at firstname.lastname@example.org.
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