Taiwan Exits Worst Post-war Recession

In Q4 economy expanded by 9.22%.

Taiwan said on Feb. 22 that it saw a pick-up in demand from top buyer China and other key markets in the region. The island's economy expanded 9.22% in the fourth quarter from the same period in 2008, but the economy shrank for the year as a whole, the Directorate General of Budget, Accounting and Statistics said.

The economy was boosted towards the end of 2009 by foreign trade, with exports in the fourth quarter hitting $59.9 billion, a rise of 17% from the same period a year earlier. "The better performance mainly came from strong exports, indicating the global economic recovery is on track," said Cheng Cheng-mount, chief economist at Citibank Taiwan.

The Taiwanese economy had not experienced positive growth since the second quarter of 2008, before it was engulfed by the global financial crisis. "Not only does this mark a return to growth after five consecutive quarters of decline, it is also the highest quarterly growth since the third quarter of 2004," said Shih Su-mei, the head of the directorate general.

Also contributing to the fourth-quarter figure was strong domestic demand as a result of a significant rise in the domestic stock market and a sharp decline in the number of employees on unpaid leave, Shih said. Taiwan's main stock index increased by nearly 80% in 2009, ending the year as one of the world's best performers.

However, the economy contracted 1.87% in 2009 year-on-year as the island experienced its most protracted downturn since modern records began. In another indication of the low level of activity, consumer prices, the main indicator of inflation, declined 0.87% over the year.

China, which is the largest buyer of Taiwan's products, is tightening its monetary policy, prompting some concern among analysts. China has made several efforts recently to cool lending amid concerns over rising inflation, asset bubbles and bad loans, triggering fears over market liquidity. "It remains to be seen whether demand on the mainland will be compromised," Cheng said. Despite the uncertainty about China, the directorate general forecast growth of 4.72% in 2010, up from a previous forecast of 4.39%.

Taiwan's corporate sector is also increasingly bullish about the outlook, analysts said. "It's a positive sign that many local enterprises are willing to raise their capital expenditure," said Adrian Wang, an economist with Yuanta Securities Investment Consulting.

Among those firms that are upbeat is Taiwan Semiconductor Manufacturing Co., the world's largest contract chip maker, which has announced ambitious expansion plans this year to meet rising global demand. The company said it will boost its capital expenditure this year to US$ 4.8 billion, up 78% from last year, while also hiring 3,000 more engineers.

Copyright Agence France-Presse, 2010

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