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Economy shows signs of moving closer to recession

2018/12/28 17:34

Taipei, Dec. 28 (CNA) The economy is showing signs of moving closer to recession, with an index gauging the economic climate falling to the lower end of a range pointing to sluggishness, which has raised concern over the pace of economic growth, according to the National Development Council (NDC).

Citing data released Thursday, the NDC, the top economic planning body, said the composite index of monitoring indicators for November fell five points from a month earlier to 17, the lowest level since March 2016, when the index stood at 16.

The November index flashed a yellow-blue light to indicate sluggishness at the lower end of the signal ranging between 17 and 22.

The NDC uses a five-color system to gauge the country's economic performance, with blue indicating economic recession, yellow-blue representing economic sluggishness, green denoting stable growth, yellow-red referring to a warming economy and red pointing to economic overheating.

In addition to the composite index of monitoring indicators, the leading indicator, which measures the economic conditions over the next six months, the coincident indicator, which gauges the current economic situation, kept moving lower in November, which further indicated the moderating economic growth, the NDC said.

In November, the leading indicator fell 0.65 from a month earlier, marking the sixth consecutive month of decline, while the coincident indicator dropped 0.42, marking the 11th straight month of decline, according to the NDC.

The NDC said trade friction between the United States and China has affected global demand and hurt export-oriented economies like Taiwan, which prompted many market observers to turn cautious about economic growth for 2019.

Several think tanks expect that Taiwan's gross domestic product growth for 2019 will range between 2.18 percent and 2.6 percent, shy of the Directorate General of Budget, Accounting and Statistics (DGBAS)'s forecast of 2.66 percent growth for 2018.

At the end of November, the DGBAS lowered its estimate of the GDP growth forecast to 2.41 percent from an earlier forecast of 2.55 percent.

Out of the nine factors in the composite index of monitoring indicators, the sub-indexes on machinery/electrical equipment imports fell one point from a month earlier to flash a green light in November, downgraded from a yellow-red light in October, the data shows.

The sub-indexes in industrial production, merchandise exports and sales generated by the wholesale, retail and food/beverage sectors also fell one point from a month earlier to flash a yellow-blue light in November from a green light in October.

Meanwhile, the sub-index on sales generated by the manufacturing sector fell one point from a month earlier, flashing a blue light in November, compared with a yellow-blue light in October.

The NDC said that while Taiwan will feel the pinch from slower global demand, domestic demand could serve as a driver to the economic growth in 2019 on the back of the government's infrastructure investment and plans of Taiwanese investors operating overseas to return to the country.

(By Pan Tzu-yu and Frances Huang)Enditem/J