Taiwan’s Government cuts both GDP growth and CPI outlook for 2016

TAIPEI – Taiwan’s Government has confirmed a rapid deterioration of economic outlook in 2016, with GDP growth in Q4 2015 revised to -0.52% y/y in Q4, from the advance estimate of a 0.28% decline. For the full year of 2015, the economy grew 0.75% y/y, compared with January’s advance estimate of 0.85%.

Taiwan’s statistical office has revised the 2016 GDP growth forecast downward to 1.47%, 0.85ppt below the forecast made in November last year. The official CPI forecast is also cut from 0.84% to 0.69%.
ANZ Bank says that since the bank’s last forecast in November, external demand has extended a significant weakness. Exports contracted 13.9% y/y in Q4 and by 13.0% in January.
“Our earlier worry of the downturn of global electronic cycle has materialised. Shipments of electronic parts contracted sharply (-7.1% y/y). Lower steel and oil prices continued to weigh on basic metal products (-19.9% y/y) and plastic and rubbers (-18.3% y/y). Optical instruments also see a sharp decline (-24.5% y/y) due to intensifying international competition.
“Notably, exports to Mainland China and Hong Kong plummeted by 19.3% y/y in January. Since the cross-strait trades are dominated by supply chain activities of Taiwan’s manufacturers, the heightening of USD/CNY volatility has started to bite and discouraged such flows.
“Therefore, we cut our forecast of Taiwan’s GDP and CPI outlook for 2016. GDP is revised down to 1.70%, from our previous estimate of 2.04%. Given stubbornly low energy prices and global disinflation, we also lower our forecast for Taiwan’s 2016 CPI inflation to 0.1%, from 0.8% previously.” www.live.anz.com (ATI).