Taiwan’s economy plunged into recession after shrinking at the fastest pace since the global financial crisis, a sign of how the dropoff in global demand for chips has showed little sign of abating.
(Bloomberg) — Taiwan’s economy plunged into recession after shrinking at the fastest pace since the global financial crisis, a sign of how the dropoff in global demand for chips has showed little sign of abating.
Gross domestic product in the first quarter of the year plummeted 3.02% versus the same period a year ago, according to advance estimates released by the Taiwanese government’s statistics bureau on Friday.
The fall — the sharpest since the quarter ended June 2009 — was far worse than the estimated 1.25% drop in a Bloomberg survey of economists. It also marked the second straight quarter of declines, underscoring the difficult outlook for the trade-dependent economy as it grapples with wavering demand for its products from the rest of the world.
“Taiwan is in a technical recession,” said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore, adding that GDP was dragged down by export and investment figures. Even with a pickup in momentum over the next three quarters, she added that GDP will see “only marginal growth” for the full year.
The worse-than-expected contraction highlights an ongoing struggle to rediscover growth as the island’s exporters contend with falling overseas demand for their products. Chip heavyweight Taiwan Semiconductor Manufacturing Co. warned in an earnings call last week that the second quarter will likely be the bottom of the current business cycle before demand recovers later in the year.
Compounding the issue is a shortfall of workers willing to take jobs in the services industry, hampering domestic demand from mitigating the lackluster performance of the export sector.
The January-to-March period was “the worst performing quarter since the financial crisis,” said Wu Pei-hsuan, a senior executive officer at Taiwan’s statistics bureau, during a Friday press briefing. She added, though, that this time around is “quite different,” since Taiwan is still supported by strong private consumption even as external demand remains “very weak.”
Taiwan’s latest figures run counter to burgeoning signs of improvement in other export economies in the region. South Korea’s GDP grew 0.3% in the first quarter, more than economists had expected. Officials project growth to pick up further by the end of the year.
China — Taiwan’s largest export market — saw its economy expand 4.5% in the first quarter. That was fueled in large part by surging consumption as shoppers, travelers and diners celebrated an end to the country’s strict Covid-19 controls.
–With assistance from Chester Yung.
(Updates to include additional details and commentary.)
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