Taiwan's economy shows early signs of recovery
By Alice Hung
TAIPEI (Reuters) - Taiwan's index of leading indicators rose for the first time in June after a 16-month slide, but while officials on Friday hailed this as a sign of economic recovery, analysts were unconvinced.
The cabinet's Council for Economic Planning and Development said the closely-watched index, which forecasts peaks and troughs in the business cycle, rose 0.4 percent from May to 92.8, the first increase in month-on-month terms since February 2000.
"Although we should continue to observe the economic condition in the future, the rise shed a light of hope for the sluggish economy," the council said in a monthly snapshot of Taiwan's economy.
But analysts and the private sector were not convinced.
"The pace of an economic slowdown may be slowing, but it's still too early to start talking about a recovery," said a macroeconomist at a local securities brokerage who asked not to be identified.
The hint of a recovery came as international ratings agency Standard & Poor's downgraded its long-term issuer credit ratings on Taiwan to double-'A' from double-'A'-plus.
The council said the three components of the leading index -- export value, M1B money supply and wholesale price index -- all rose in June.
The council's monthly poll of manufacturing executives, a gauge of economic sentiment, found only eight percent of those polled expected the economic situation to improve in the next three months, down from 13 percent in May.
Some 42 percent of those surveyed expected the business climate to worsen in the next three months, up from 37 percent in May. Fifty percent said it would remain the same, unchanged from May.
The council said a loose monetary policy after seven interest rate cuts coupled with state stimulus measures to boost public infrastructure projects would help the sagging economy, which grew 1.06 percent year on year in the first quarter, the slowest pace in 26 years.
The index of coincident indicators fell 1.2 percent to 98 in June, the lowest since February 1993, while manufacturers capacity utilisation was down 0.7 percentage point to 76 percent from last month, the council said. |
