Taiwan economy shrank in first quarter as weak exports persist

[TAIPEI] Taiwan's economy contracted on a yearly basis for a third straight quarter as an export slump showed no signs of abating.

Gross domestic product fell 0.84 per cent in the three months through March from a year earlier, according to preliminary data released by the statistics bureau Friday. That compares with a 0.65 per cent drop projected by the median estimate in a Bloomberg survey of economists and the 0.52 per cent decrease in the third quarter.

Taiwan's exports have posted double-digit declines in the past 10 months amid slower growth in their top destination China and waning demand for electronics, a key product for the island. Weakness in exports is curbing wage growth and weighing on domestic consumption, adding urgency to President-elect Tsai Ing-wen's pledge to revive the economy with new engines of growth when her term begins in May.

"As external demand continues to be weak, so is the momentum for recovery," Claire Huang, an economist at Societe Generale SA in Hong Kong, said before the release. "In the labour market, wage growth has turned weak and the unemployment rate is climbing."

As global trade slows, the incoming president has proposed developing industries such as biotechnology and smart machinery.

The central bank is also expected to help resuscitate growth by cutting the policy rate for a fourth straight quarter in June, according to economists surveyed by Bloomberg.

BLOOMBERG