Taiwan Cuts GDP Forecast, Underscoring Signs of Asia Slowdown

By Victoria Batchelor and Janet Ong

Aug. 23 (Bloomberg) -- Taiwan cut its forecast for 2008 growth as exports and consumer spending cool, the latest sign a slowdown in the world's largest economies is spreading across Asia.

The economy will expand 4.3 percent this year, the weakest pace since 2003 and down from an estimate of 4.78 percent made three months ago, Taiwan's statistics bureau said yesterday. Growth this quarter will be the slowest in more than three years, it predicted.

Asia's stocks fell for a fourth week, driving down the region's key index to a two-year low. Taiwan joins governments in Singapore and the Philippines in cutting growth estimates this month as fallout from the global credit squeeze worsens while soaring fuel and food prices damp household spending.

``The U.S.-led global slowdown is taking a toll on Asian economies,'' said Lim Ji Won, an economist at JPMorgan Chase & Co. in Seoul. ``Demand for the region's electronics exports is easing and, compounding the problem, Asian consumers are struggling with soaring living costs.''

Economists at Goldman Sachs Group Inc. on Aug. 21 said countries that account for half of the world economy face recession, while analysts at JPMorgan estimate a global expansion of 1 percent this quarter, the weakest in seven years.

The benchmark MSCI Asia Pacific Index fell yesterday to its lowest since July 26, 2006, and has slumped 23 percent in 2008.

Taiwan's Taiex index of shares declined 4 percent this week, the biggest drop in five weeks.

Asian Exporters

Demand for Toyota Motor Corp.'s cars, Samsung Electronics Corp.'s flat-screen televisions and Acer Inc.'s laptop computers has eased as the U.S. housing recession damps shipments to Asia's largest overseas market.

Singapore, which lowered its growth estimate on Aug. 8, said this week that exports fell for a third month in July. The island state also reported retail sales declined 3.2 percent in June, the first drop in four months, as consumers bought fewer mobile phones and computers.

The Philippines this week cut its economic growth forecast for the second time this year. Gross domestic product may expand 5.5 percent to 6.4 percent in 2008, from an earlier forecast of as much as 6.6 percent, Economic Planning Undersecretary Augusto Santos said in an interview from Manila on Aug. 20.

South Korea's department store sales rose by the least in five months in July as consumers cut purchases of new clothes as their budgets came under pressure from surging living costs, its government said on Aug. 18.

Central Banks

``Asia is cooling like the rest of the world, and we'll see the region's economies slow further in the second half,'' said Shane Oliver, chief economist at AMP Capital Investors in Sydney. ``That's why it's appropriate that central banks are beginning to turn their focus to growth and away from inflation.''

The Reserve Bank of Australia said on Aug. 19 that it may soon lower interest rates for the first time in seven years to avoid a deeper slowdown. The bank raised borrowing costs twice in 2008.

The Bank of Japan cut its economic assessment on Aug. 21, saying growth is ``sluggish'' for the first time in a decade. Asia's biggest economy contracted last quarter as exports fell and consumers spent less, bringing Japan to the brink of its first recession in six years.

``Inflation is close to the peak and central banks have bought into that and, around the region, are really starting to talk more about the need to shore up growth,'' said Tim Condon, chief Asia economist at ING Groep NV in Singapore. ``Inflation is yesterday's story.''

Chinese Demand

The economic news hasn't been all bad this week. Demand from China, the world's fastest growing major economy, is still helping to shore up Asia nations.

A report two days ago showed Japan's exports to China climbed to a record in July, exceeding the value of those sent to the U.S. for the first time since the government began compiling monthly figures in 1950.

Thailand's overseas shipments surged 43.9 percent in July from a year ago, the fastest growth since at least 1992, figures on Aug. 21 showed.

Melbourne-based BHP Billiton Ltd., the world's biggest mining company, this week posted a 30 percent gain in fiscal second-half profit after boosting production to benefit from rising prices.

``Raw-materials demand in China is going to be very strong for decades to come,'' Chief Executive Officer Marius Kloppers said on Aug. 18. While a global economic slowdown may lead to ``higher volatility'' in prices in the short term, China's demand remains ``resilient,'' he said.

To contact the reporter on this story: Victoria Batchelor in Sydney at vbatchelor@bloomberg.net.