Taiwan Stocks Soaring Despite Record 10.2% GDP Drop

Taiwan’s economy shrank by a record 10.2 percent year-on-year in the first quarter on slumping exports, the government said Thursday, as it forecast a deeper contraction this year.

Taiwan’s Directorate-General of Budget, Accounting, and Statistics said the global recession continued to hurt Taiwan’s exports — the main engine of the island’s economic growth.

Exports, calculated in U.S. dollars, declined by 36.7 percent year-on-year in the first quarter, it said. “This worst result is the main reason why the economy contracted significantly.”

The agency said it expected the economy to shrink by 4.25 percent for all of 2009. Its previous forecast was for a 3 percent contraction.

It predicted that the economy would contract by 8.5 percent in the second quarter and 3.0 percent in the third, before returning to growth with a 5.2 percent expansion during the September-December period. It shrank 8.6 percent in the fourth quarter of 2008.

In contrast to the dire economic numbers, Taiwan’s stock market is surging. It has gained more than 50 percent since its January low point, mostly on expectations of improved investment and trade opportunities with China.

Since President Ma Ying-jeou took office last May, he has moved aggressively to turn the corner on his predecessor’s anti-China stance and forge closer ties with Beijing.

He has resumed high-level dialogue between the sides, facilitated regular direct transportation links, and loosened regulations on Taiwanese investment in China and Chinese investment in the island.

Taiwan and China split amid civil war in 1949. Despite their close commercial links Beijing continues to claim the island as part of its territory, and has threatened war if Taiwan seeks to make the break permanent.

5/21/2009 6:01 AM DEBBY WU Associated Press Writer TAIPEI, Taiwan