Taiwan sees further fall in economic growth By Mure Dickie in Taipei Published: March 27 2001 16:50GMT | Last Updated: March 28 2001 02:40GMT

Taiwan's index of leading indicators fell last month, pointing ahead to a further slowing of economic growth for an island already beset by weakness in both external demand and domestic consumption.

The 2.4 per cent month-on-month fall in the Council of Economic Planning and Development's composite index of leading indicators - which includes manufacturing working hours, prices, share values and exports - followed a 1.4 per cent decline in January.

The latest slide came just days after the government revealed that the unemployment rate hit a 15-year high of 3.73 per cent last month, news that can only fuel insecurities among consumers.

Officials had warned that another decline in the leading indicator index in February could suggest economic growth this year might fall below 4.7 per cent - well under the 6 per cent recorded for 2000 and very low by Taiwanese standards.

Economists said the worst was not over for Taiwan, which sailed through Asia's 1998-99 financial crisis relatively unscathed but has continued to suffer from banking sector weakness and an uncomfortable transition from uneconomic "traditional" industries.

"There's more bad news to come through - we haven't hit the bottom yet," said Damian Gilhawley, economist at local brokerage China Securities. "The outlook is bleak."

The most pressing threat is a double whammy to Taiwan's exports caused by the slowdown in the US - the island's most important market - and by weak global demand for the high-technology products that have previously provided the bulk of its export growth.

The administration of Chen Shui-bian, president, has been touting stimulus spending as a way to boost growth, but has struggled to win backing from the opposition-dominated legislature.

The central bank is on Wednesday widely expected to cut interest rates for the fourth time in three months, but few analysts expect it to do anything to shake its reputation for monetary caution. While real interest rates remain relatively high and inflation low, the bank's desire to avoid shaking confidence by allowing the currency to depreciate is likely to keep any cut small.

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-- Carl Jenkins (somewherepress@aol.com), March 28, 2001