Taiwan in recession, GDP shrinks record 8.36%

TAIPEI (AFP) -- Taiwan plunged into recession as the economy contracted a record 8.36 percent in the three months to December due to the global economic meltdown, the government said Wednesday.

The island's key electronics and export sectors have been badly hit by falling overseas demand.

The figure "marked the biggest slump since 1961" when the government started compiling quarterly figures, the Directorate General of Budget, Accounting and Statistics said in a statement.

The agency had previously forecast a contraction of 1.73 percent in fourth quarter gross domestic product, and blamed the global economic turmoil which has hit the important export sector.



Taiwanese workers chant slogans during a protest against massive layoffs


"The pace and scale of the global economic downturn beat our forecast. Taiwan's export and manufacturing sectors suffered a huge setback and the private sector's investment shrank at a fast pace," the agency said.

The export sector, the primary engine of Taiwan's economy, tumbled 19.75 percent while imports fell 22.63 percent.

Chen Tain-jy, head of the Council for Economic Planning and Development, admitted that "Taiwan's economy was moving into recession" after GDP contracted for two consecutive quarters.

The island's economy contracted a revised 1.05 percent in the third quarter, up from 1.02 percent when the figures were first released in November.

For the full-year 2008, GDP edged up 0.12 percent while per capita GDP came in at 17,576 US dollars.

Looking ahead, the agency predicted the domestic economy would contract 2.97 percent in 2009 as overseas demand for electronic-related products -- Taiwan's main exports -- is not expected to pick up anytime soon.

Taiwan's GDP is projected to contract for three more quarters --- 6.51 percent in the first quarter, another 6.85 percent in the second quarter, and 2.67 percent in the third -- before swinging back to a rise of 4.50 percent in the fourth quarter.

"This is likely to be the longest recession in Taiwan's history so far," Shih Su-mei, head of the agency, told reporters.

Shortly after the announcement, Taiwan's central bank announced a further 25 basis point cut to its key interest rate, trimming the benchmark discount rate to 1.25 percent in a bid to boost domestic demand.

The cut is the seventh in four months.