Taiwan lowered its annual growth forecast yesterday as the trade-reliant economy took a hit from global sluggishness and slowing investment in the private sector.
Gross domestic product is now estimated to grow 1.06% in 2016, 0.41 percentage points lower than the previous forecast made in February, the government said.
“The primary causes were weak demand from abroad and lower-than-expected investment in the private sector,” the directorate general of budget, accounting and statistics said in a statement.
But the top government budgeting body adjusted its GDP growth slightly upward for the first quarter, saying GDP fell 0.68% in the three months to March. Last month it said the economy contracted 0.84% in the first quarter.
Despite the adjustment, the outlook for the domestic economy remains gloomy in the second half of the year.
The budgeting body forecast that “exports will not resume growth until the third quarter after declines for six consecutive quarters”.
“World economies have been losing momentum as demand for consumer electronic products are in decline,” it said. “The results from mainland China’s ongoing policies to develop its own supply chains” are also exacerbating the situation.
Traditionally an export-driven technology hub, Taiwan has benefited from companies such as Apple, with a number of leading Taiwanese firms including Foxconn and TSMC among the tech giant’s suppliers for the iPhone.
But China has been pushing to grow its own tech industry, with the development of domestic smartphone brands and homegrown hardware.
Last year saw Taiwan’s shipments fall by a tenth compared to the previous year.
Taiwan has now seen three consecutive quarters of shrinking GDP.
Economists consider two quarters of negative growth to be a recession.
The island’s poor economic performance under former president Ma Ying-jeou’s administration played a major role in the Kuomintang party’s defeat in the January presidential vote. In her inaugural speech in May, Ma’s successor President Tsai Ing-wen of the China-sceptic Democratic Progressive Party (DPP) pledged to shake up the island’s economy.
She said the Taiwanese economy had been stuck in a rout, with local companies manufacturing products for global brands for years despite thin profit margins.