08.20.2001
Taiwan in recession

• Development: Following a revised 0.9% growth in 1Q01 GDP, in 2Q01, GDP contracted 2.4% YoY. Government revised its full-year growth forecast down from 4.0% to a decline of 0.4%. Government forecasts GDP to contract 2.5% in 3Q01 before recovering to a growth of 2.4% in 4Q01.

• Analysis: Figures were well below consensus and our own forecasts. A dramatic fall in exports (down 17% YoY), resulted in a 13.7% fall in private investment and just a 1% rise in private consumption. Thus, slowdown looks to be spreading from tech sector to general economy.

• Primasia View: We expect GDP to contract at least 1.7% in 2001 subject to further revision. Central Bank may cut rediscount rate further. The figures may result in more drastic policy responses. The NT$ could test NT$35.0/US$1 again.