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Taiwan: Country Economic Forecast: 23 Feb 2012

11 Pages Oxford Economics February 23, 2012 SKU: OFE3790006

The slowdown in the economy triggered by the deteriorating global conditions has resulted in Taiwan entering a technical recession. The initial estimates for GDP in Q4 2011 show that the economy contracted by 0.2% after shrinking 0.3% in Q3. Growth of all the key components of GDP weakened in Q4. Export volumes grew by just 0.4% year-on-year, although with imports contracting by 7.6% net exports provided a boost to GDP. Domestically, consumption growth slowed to 1.7% from 3.1% in Q3, while gross capital investment contracted sharply, by 19.2%. The monthly indicators also suggest that the economy will remain sluggish in the short term. Goods exports fell 16.8% year-on-year in January (although this partly reflects the timing of the Lunar new year). However, unemployment remained low in January. With the initial estimates for Q4 GDP broadly matching our forecast, we have left our forecast for growth this year unchanged, at 3.3%, after 4% in 2011. The disruption to harvests caused by bad weather at the end of last year has continued to affect prices, with inflation jumping to 2.4% in January. But looking ahead, pressures will ease and we expect inflation to average 1.7% this year. Despite the higher inflation rate, the worsening economic conditions mean we expect the central bank to cut the discount rate at its next meeting, to 1.75%.

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Taiwan: Country Economic Forecast: 23 Feb 2012

Oxford Economics
February 23, 2012

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