Taiwan June data confirms pessimistic H2 outlook
By Kirby Chien
TAIPEI, July 23 (Reuters) - Taiwan released another batch of dismal economic data on Monday, confirming an increasingly pessimistic outlook for the remainder of the year.
While the depressing June data was largely anticipated by the market, the combined release of record high unemployment, the largest decline in industrial output in 26 years and the steepest plummet in export orders in 20 years still weighed on investor sentiment already battered by months of nothing but bad news.
"There simply doesn't seem to be any infliction point in sight," said Graham Courtney, a regional economist for UBS Warburg based in Tokyo.
With the economy foundering in uncharted waters indicative of recession, the government has little choice but to continue cutting interest rates and allowing the local dollar to depreciate, economists said.
On Monday, Taiwan said June's unemployment rate worsened to 4.51 percent, a new monthly record, leading the cabinet's statistics agency to re-think its worse-case jobless scenario for 2001.
Minutes earlier, the Ministry of Economic Affairs said the island's June industrial output shrank 11.27 percent year on year, the largest decline since 1975.
Completing the rout, the ministry posted export orders that fell 19.92 percent last month from the same month in 2000 to US$11.153 billion, the largest decline since 1981.
THIRD QUARTER WRITTEN OFF
Taiwan's economic growth crawled in at 1.06 percent in the first quarter and economists are falling over themselves revising second quarter and full-year forecasts downward.
"The economy is in tremendous slowdown, and is going to face recession as Q2 growth will be negative quarter-on-quarter," said Bhanu Baweja, the head of Asian research at IDEAglobal in Singapore.
The government has no choice but to continue its loose monetary policy and allow further depreciation of the Taiwan dollar, said Baweja.
Economic growth in the first three months of the year contracted 1.21 percent from the previous quarter, and IDEAglobal is forecasting a slight 0.25 percent growth in the second quarter which would represent a second consecutive on-quarter slippage.
Taiwan's central bank has lopped 1.25 percentage points off key interest rates in seven stages since December, while allowing the local dollar to fall more than six percent over the past two months to a more than 14-year low reached earlier this month.
While the local dollar has stabilised in the last few sessions, IDEAglobal still reckons the Taiwan dollar could pull back further to T$37.5-T$36.5 by the end of the third quarter depending on the strength of the Japanese yen.
OFFICIALS ECHO ANALYSTS PESSIMISM
Government officials agreed third quarter data could get worse still, and gave frank assessments of Taiwan's economy going forward.
"The chances that the full-year jobless rate will be greater than 4.1 percent are definitely there," Chen Jin-cheng, the top statistician at the Directorate General of Budget, Accounting and Statistics. Chen had said last month that Taiwan's "worst-case" 2001 unemployment rate was 4.1 percent.
Unemployment reached a record 2.99 percent in 2000.
Adding to the gloom, Chang Yaw-tzong, the economic ministry's chief statistician, said the outlook in the second half of the year remained decidedly downbeat. "Export orders in the second half will remain in negative growth," he said.
While the economic data were largely discounted by market players, the combined release of Monday's figures still darkened investor sentiment.
Taiwan stocks quickly reversed early gains to close nearly two percent lower at a fresh seven-and-a-half year closing low on Monday, led by the slide in shares of heavily-weighted Taiwan Semiconductor Manufacturing Co <2330.TW>.
After reaching a more than 14-year low earlier this month at T$35.05 to the U.S. dollar, the local dollar has stabilised strengthening for the fourth straight session to end Monday's trading at T$34.893.
05:24 07-23-01 |
