Taiwan: Economy enters into technical recession in Q4
January 29, 2016
In the fourth quarter of 2015, GDP dropped 0.3% over the same period of the previous year, according to preliminary data released by the Directorate General of Budget Accounting and Statistics (DGBAS) on 29 January. The reading overshot market expectations of a 0.6% contraction and came in above Q3’s 0.6% decline. Nevertheless, the economy officially entered into a technical recession as GDP contracted for two consecutive quarters. In annual terms, the economy suffered a stark deceleration in 2015 as GDP growth dropped from 3.9% in 2014 to 0.9% in 2015. The revised 2015 figures for National Accounts of will be published on 19 February.
Q4’s downturn came on the back of a contraction in the external sector, which more than offset an improvement in the domestic economy. Subdued demand and stiffer competition for electronic products from Mainland China weighed on the external sector. Low oil prices gave an important boost to the domestic economy as they fueled buoyant consumption in the last quarter of 2015. Private consumption expanded a solid 1.6% year-on-year in Q4, which came in above Q3’s 0.5% growth. Government consumption swung from a 0.4% contraction in the third quarter to a 0.2% rise in the fourth quarter. Gross capital formation, on the other hand, contracted 0.4% in Q4 (Q3: -0.3% year-on-year)
On the external front, exports of goods and services contracted 2.8% in Q4 (Q3: -3.0% yoy). In addition, imports dropped 1.6% , coming in above Q3’s 2.2% decline. As exports deteriorated at a faster rate than imports, the external sector’s net contribution to overall economic growth declined from minus 0.8 percentage points to minus 1.1 percentage points.
On a sequential basis, GDP rose 0.8% over the previous period in seasonally-adjusted terms, which contrasted the 0.3% decline observed in the third quarter of the year. Q4marked the best reading since Q3 2014 and is a possible indication that Taiwan’s economy bottomed out in the third quarter of last year.