TAIPEI, Taiwan (AP) — Taiwan's economy contracted 0.2 percent in the second quarter from the year before as demand faded for the island's mainstay electronics exports. The government lowered its growth forecast for 2012 for the seventh time in just over a year.
The Directorate General for Budget, Accounting and Statistics said Tuesday that Taiwan's economy would grow only 2.1 percent this year, down from its forecast in May of 3 percent growth.
Taiwanese exports drive the island's economic growth but they have dropped sharply, constrained by a sputtering world economy. In May, the government forecast second quarter growth of 0.8 percent.
For the first six months of this year, exports fell 4.7 percent to $146.8 billion. Smartphones, computer memory chips and flat-screen panels have all suffered sharp sales declines. Rising foreign competition, especially from South Korea, has also hurt Taiwan's exports.
Economic Minister Shih Yen-hsiang has recognized that parts of the island's electronics sector have suffered from a fading competitive edge. But he notes manufacturers are taking measures to reverse the downward trend.
Among them, Foxconn Technology Group has bought a stake in Sharp Corp., hoping to make advanced flat panels with the cutting-edge technology from the Japanese electronics giant.
Officials say the signing of an investment protection agreement next month could herald more Chinese investment to boost the local economy.