Taiwan’s GDP in the first quarter is expected to shrink 1.4 percent year-on-year due to sluggish exports, causing the nation to enter a technical recession, DBS Bank Ltd (星展銀行) said yesterday.
An economy is considered to be in a technical recession if it experiences two consecutive quarters of contraction.
The nation’s economy is expected to rebound in the second quarter, thanks to robust private consumption and improving exports, Singapore-based DBS economist Ma Tieying (馬鐵英) told an online news conference.
Photo: Hsu Yi-ping, Taipei Times
The economy is forecast to expand 1.9 percent each in the second and third quarters, on the back of private consumption and government spending, Ma said.
However, export growth would likely stay in negative territory in the first half of the year due to still-weak manufacturing momentum in China, she said.
The resumption of manufacturing in China should more meaningfully contribute to Taiwan’s exports in the second half of this year, Ma said.
With exports likely to expand 3.9 percent year-on-year in the fourth quarter, the nation’s GDP is expected to show an annual gain of 3.7 percent in the final three months of the year, Ma said.
Overall, Taiwan’s GDP growth is forecast to slow to 1.6 percent this year, from 2.5 percent last year, she said.
The nation’s consumer price index (CPI) is expected to grow 2 percent this year on higher food and electricity costs, DBS said.
The core CPI, a more reliable long-term price tracker as it ignores volatile items such as energy and vegetables, has stayed above 2 percent for 12 months in a row, the first time since 2008, Ma said.
“If core inflation remains above 2 percent, the central bank could increase its policy rates by at least 12.5 basis point in June,” she said.
Separately, the National Development Council said it would boost its spending of public construction funds to support economic growth, council Minister Kung Ming-hsin (龔明鑫) said on Monday.
Spending by the council on public works in the first quarter totaled NT$125.6 billion (US$4.11 billion), or 18.32 percent of this year’s budget.
The figure is up NT$30.7 billion from the same period last year and a 16-year high, the council said in a statement.
Kung called on government agencies to work toward a 95 percent budget execution rate to help the economy, as the nation’s exports have been affected by a global economic slowdown.
Government agencies should set monthly budget execution goals, closely monitor the progress of individual projects, and come up with quick responses and solutions when they hit a snag, Kung said.
Agencies can seek cross-ministerial assistance through the Public Construction Commission, if necessary, Kung added.
Government investment would play a critical role in helping stabilize the nation’s economy and serve as a growth catalyst when all sectors emerge from COVID-19 restrictions, Kung said.
Private investment is expected to slow drastically this year, following aggressive expansions in the past few years, after the effects of COVID-19 bonuses faded and global technology brands canceled or postponed orders to cope with tepid sales.
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