Macroeconomic Forecast Taiwan

BMI View: Taiwan's third quarter GDP data came in on a very downbeat note, with the economy registering a contraction of 1.02% y-o-y, from an upwardly revised expansion of 4.56% in Q208. Although a slowdown was widely penciled in, given the island's heavy reliance on trade and the droopiness of domestic demand, the velocity with which the economy has decelerated (the worst print since Q401) came as somewhat of a surprise. As the economy is highly unlikely to perk up during the fourth quarter, we have decided to revise our growth forecasts for Taiwan quite dramatically and now expect growth to slow to a paltry 1.5% in 2008 (from 4.1% previously) and fall to a negative 0.2% in 2009. This is more pessimistic than the government's new 1.87% and 2.12% forecasts for 2008 and 2009.

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