Taiwan's GDP Growth Slows

Bloomberg reports some dismal news for the Taiwanese economy:

Taiwan's economy probably grew at the slowest pace in more than a year last quarter as consumer spending cooled and U.S. customers bought fewer laptops, flat- screen televisions and mobile phones.

Gross domestic product expanded 4.54 percent from a year earlier, easing from a 6.06 percent gain in the first quarter, according to the median of 14 economists surveyed by Bloomberg News. The report is due about 4:30 p.m. in Taipei today.

The weakest economic growth since the start of 2007 may have driven up the jobless rate to a three-month high in July as companies pared hiring. Easing U.S. demand has slowed sales for Acer Inc. and Taiwan Semiconductor Manufacturing Co., while Marks & Spencer Group Plc said it will close three Taiwan stores as rising living costs damp spending by the island's consumers.

``The economy is facing growing headwinds and will slow sharply over the rest of this year,'' Rob Subbaraman, chief Asia economist at Lehman Brothers Holdings Inc. in Hong Kong, wrote in a report. ``There are growing signs of weakness in the tech sector, the linchpin of the economy. Consumption is weakening.''

The Taiex Index of stocks has declined 17 percent this year on concern slowing global growth will erode corporate earnings. Exports are equivalent to about 50 percent of the island's GDP.

Taiwan follows South Korea, Singapore and Japan in reporting a deteriorating economy because of faltering demand in the U.S., the region's largest overseas market.

Japan's economy, Asia's largest, shrank in the second quarter by the most since 2001. Singapore posted the weakest growth in five years and South Korea's economy expanded at the slowest rate in more than a year.

Rising Unemployment

Taiwan's unemployment rate rose to 3.9 percent in July after some companies halted operations, according to the median estimate of 12 economists surveyed by Bloomberg. The statistics bureau releases the jobless report at 4 p.m. today.

The island's intercity bus operator Dragon Bus Corp. suspended its services for a year because of high oil prices. Marks & Spencer last month said it will shut three Taiwan stores it runs with President Chain Store Corp., less than 18 months after the U.K.'s largest clothing retailer entered the market.

``Downside risks have intensified. The economy will likely continue decelerating in the second half,'' said Cheng Cheng- mount, chief economist at Citibank in Taipei. ``We expect policy makers to shift focus from upside inflation risk to downside growth risk in the second half.''

The central bank raised its interest rate to a seven-year high of 3.625 percent on June 26 to damp inflation. That marked the 16th consecutive quarterly increase in borrowing costs.

Inflation accelerated to 4.97 percent in June, the fastest pace in eight months, as fuel and food costs climbed.

Slowed growth, increasing unemployment and rising inflation is not good news for the weekend. I am encouraged to see Bloomberg not taking a petty approach to laying the blame of slowing growth at the door of the government. The quoted article aboved correctly observes that decreasing demand in the US is having an adverse affect on Taiwan's economy in particular and the regional economies generally. Unfortunately there is not much the government can do and unfortunately for President Ma his election platform was rejuvenation of the economy. I am not sure how he intends to do that but we will wait and see. His best bet I reckon would be to ensure the economy stays viable and companies here remain competitive making sure when the global economy improves the local companies are ready to pounce.

Bloomberg: Taiwan's GDP Growth Probably Slowed on Spending, U.S. Exports