POLL-Taiwan economy expected to recover strongly in 2010

Published: 20 Aug 2009 23:41:53 PST

* Taiwan economy likely to post record contraction in 2009

* Economists see upside potential, growth in 2010

TAIPEI, Aug 21 - Taiwan's economy is likely to suffer its biggest contraction on record this year, but it is expected to recover strongly next year on post-typhoon reconstruction and a pickup in China- and U.S.-bound exports, a Reuters poll shows.

The survey of 13 economists was conducted a day after second quarter gross domestic product data showed the economy expanded for the first time in over a year in the April-June period on an annualised basis and the government raised its GDP estimate for 2009. [ID:nTP93790]

The poll yielded a median 4.1 percent GDP contraction this year and a 4.0 percent expansion for next year, in line with the statistics agency's latest estimates for a 4.0 percent fall and a 3.92 percent rise respectively.

A similar poll conducted last week preduced a median forecast for a 4.0 percent contraction this year.

But several analysts, including those from Barclays Capital, Citigroup, HSBC and Standard Chartered, said the economy might outperform their 2009 or 2010 forecasts.

JPMorgan raised its 2010 GDP forecast for Taiwan to 5.5 percent from 5.0 percent, while Forecast estimated that the tech-reliant economy will contract by 3.9 percent this year, compared with a 5.2 percent fall previously.

"After the second quarter results, we revised our 2010 GDP forecast upwards mainly due to typhoon reconstruction costs and a better outlook in exports," said Qian Wang, an economist at JPMorgan.

Analysts said booming demand from China, Taiwan's largest trading partner, will likely boost the island's $390 billion economy over the next year or so, with firms expected to export more of its flagship electronics components and gadgets to the Asian giant.

Typhoon Morakot, which triggered the island's worst floods in about 50 years last week, destroyed roads and bridges in Taiwan's south, prompting the government pledging to spend about T$100 billion ($3 billion) over the next three years for reconstruction.

The special reconstruction budget is still subject to parliament approval.

Chris Wong, an economist at HSBC, said there was a marginal upside to his 2009 forecast for a 5.1 percent contraction that would depend on when the government implemented its budget for more infrastructure projects and typhoon reconstruction. Taiwan GDP forecasts: (Percent change from a year earlier)

Prev 2009 Prev 2010

Barclays Capital -4.0 +4.5

Citigroup -4.4 +3.3

DBS -4.0 +4.3

Forecast Ltd -3.9 +6.2

Goldman Sachs -5.0 +4.0

HSBC -5.1 +4.4

ING -4.0 +3.2

JPMorgan -3.8 +5.5

Masterlink Securities -4.2 +3.0

Mega Securities -4.08 --

Moody's economy.com -5.2 +3.4

SinoPac Holdings -4.0 +3.93

Standard Chartered -5.0 +3.1

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Median -4.1 +4.0