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Economy

2015 GDP forecast cut to 1.56% on weak exports

TAIPEI -- The export-reliant Taiwanese economy could grow at the slowest rate since 2010 due to softer global demand weakening its exports and the rising threats from China's technology supply chain, the island's statistics bureau said Aug. 14.

     The Directorate-General of Budget, Accounting and Statistics slashed the full-year gross domestic product growth forecast for 2015 to 1.56% from its May estimate of 3.28%, saying Taiwan's economy is expected to grow 0.1% in the third quarter and 1.9% in the September-December period. 

     "A global economic growth slowdown and decelerating demand for consumer electronics are creating an adverse impact on exports," said Minister Shih Su-mei of the statistics bureau. "The expansion of China's supply chains including the electronics industry are also putting pressure on Taiwanese companies."

     Shih said that exports of commodities will drop 7.1% year-on-year in U.S. dollar terms in 2015. Electronics components account for 40% of the island's exports.

     Officials at the directorate-general said a further economic slowdown in China, the continuing rise of the Chinese supply chain, and the negative impact on demand in emerging markets of a possible interest rate hike in the U.S. could all put additional pressure on the island's growth later this year.

     For the April-June period, officials also cut their July estimate of growth of 0.64% to 0.52%, meaning a significant lag behind Hong Kong, Singapore, and South Korea, three comparable Asian economies. On the other hand, they raised the growth for the first quarter from 3.37% to 3.84%.

     However, officials said they have not taken into consideration the impact that the recent renminbi devaluation and the possible depreciation of Taiwanese currency against the dollar might have on the island's economy later this year.

     Officials estimated that the island's GDP will grow 2.7% in 2016 thanks to improved global economic conditions.

     Taiwan's sluggish economic growth is reflected by the fact that a number of major Taiwanese tech companies have had a lackluster second quarter and warned of approaching headwinds.

     The world's largest contract chip maker Taiwan Semiconductor Manufacturing Co. told investors in July that while it will continue to outperform competitors, overall growth in the industry is slowing and its ongoing inventory correction will only end in the fourth quarter.

     Meanwhile, key Apple product assembler Foxconn Technology Group reported a mixed second quarter, with revenue beating market estimates and profits slightly missing analysts' forecasts. Analysts warn that a depreciating yuan and the economic slowdown in China could hamper the company's growth later this year.

     MediaTek, the largest mobile chip supplier to China, saw its second quarter net profit drop 49% from a year ago due to stiff competition with U.S. rival Qualcomm at the high end of the market, and with China's Spreadtrum Communications at the low end. 

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