Taiwan cuts 2012 growth forecast again after modest Q3 pick up

TAIPEI: Taiwan cut its 2012 growth forecast for a ninth time in just over a year on Wednesday as Europe's ongoing woes, concerns over the US economy and China's slowdown kept third-quarter growth below forecasts, but bright spots indicate the economy may have bottomed out.

The economy grew a preliminary 1.02 percent in the third quarter of 2012 year-on-year, the statistics agency said, below the median forecast in a Reuters poll for 1.55 percent growth, and ticked up 0.86 percent from the previous quarter.

But persistent global concerns saw the 2012 full-year forecast cut to 1.05 percent from 1.66 percent, the ninth cut since August last year.

Economists, however, said the economy appeared to be turning the corner and was heading towards a modest recovery.

"Taiwan is recovering but at a slow pace," said Aidan Wang, economist at Yuanta Securities in Taipei.

"We forecast a 3-4 percent growth in Q4. This should be the last time the government revises down full-year GDP because the economy has reached the bottom. From Q4 to Q2 next year the growth will be better on a low base effect."

Taiwan is one of the most exposed among Asian exporting economies to fluctuations in overseas demand, particularly for high-tech items. Europe's prolonged debt crisis, China's slowdown and an uncertain recovery in the United States have been putting a big damper on demand.

Its exports fell for six straight months to August, as did orders for its exports, a leading indicator of demand. Fellow tech exporter South Korea's economic growth almost stopped in the third quarter, gaining just 0.2 percent from the previous three months in real, seasonally adjusted terms.

Meanwhile, the economy of China, the top destination for Taiwan's exports, grew 7.4 percent in the July-September quarter from a year earlier, marking the lowest rate of growth in three years, though there have been more recent signs that a recovery is slowly taking hold there as well.

At home, demand in Taiwan has been under growing pressure in part because of a slumping stock market.

Individuals account for about 40 percent of stock trading in Taiwan, where investing is a common way of compensating for low wage growth.