By Roger Tung and Yimou Lee
TAIPEI (Reuters) – Taiwan’s government lowered its 2020 economic growth estimate on Wednesday, as the coronavirus outbreak threatens to hit its export-reliant economy that is a key part of the global electronics supply chain.
The growth forecast was trimmed to 2.37% from 2.72% seen in November. The government also cut its outlook for 2020 export growth to 2.85%, from November’s 3.12%.
The 2020 revisions were mainly due to the impact of the virus outbreak on exports and domestic consumption, the Directorate General of Budget, Accounting and Statistics said, adding that it was a “major uncertainty” for Taiwan’s growth outlook and could drag on its exports.
Some analysts, however, are more pessimistic about Taiwan’s growth outlook, citing the island’s extensive exposure to factories and supply chains in China as the virus outbreak disrupts factory production in the world’s second-largest economy.
Taiwan sends about 40% of its exports to China but has been trying to wean itself off dependence on its giant neighbor.
“Broken supply chains are now a real concern, and we’re cutting our 2020 growth forecast in half,” ING economist Iris Pang wrote in a note before the data, revising Taiwan’s GDP forecast to 0.8% from 1.6%.
“Taiwan is part of this supply chain, and will inevitably be affected.”
Fourth-quarter growth in 2019 was marginally lowered to 3.31% from a preliminary 3.38%, putting full-year 2019 GDP at 2.71% instead of 2.73% forecast earlier, statistics agency data showed on Wednesday.
In 2018, the economy expanded 2.75%.
Taiwan’s first-quarter exports will suffer short-term impact from China’s coronavirus outbreak, a finance ministry official said last week, adding that she was cautious but not pessimistic about the full-year outlook.
Taiwan is one of Asia’s major exporters especially of technology goods such as smartphones, and its export trend is a gauge of global demand for technology gadgets.
The government also reduced its inflation outlook for 2020 to 0.62% from 0.71% projected in November.
Shares of Taiwan tech firms have been under pressure due to concerns over the epidemic that has killed more than 1,100 people in China.
Foxconn <2317.TW>, Apple’s main iPhone maker, has seen its share price drop more than 7% since trading resumed on Jan. 30 after the Lunar New Year as the company worked to reopen some factories in China closed because of the coronavirus.
Taiwan’s economy grew at the fastest pace in one-and-a-half years in the fourth quarter, partly helped by a recovery in electronics demand amid easing concerns over a U.S.-China trade war.
(Editing by Jacqueline Wong)