Taiwan

Few countries are hit as hard by the crisis as Taiwan is:

- In Jan/Feb, exports fell 37 % yoy, with exports to China down an incredible 50 %

- Total industrial production was down 41 % yoy (Jan only, don't have Feb figures yet)

- Latest GDP forecast for 2009 are anywhere from -6.5 % (The Economist) to -11 % (according to unnamed "analysts" cited by Taiwan News Online)

What are the reasons for this collapse?

1. Destocking of Chinese manufacturers: Most of Taiwan's exports to China is used as components to be further processed in China. Due to the credit shortage, there has been massive destocking over the last few months.

2. Taiwan specialises on electronics. Many of its products have recently seen a collapse in price. Things are particularly extreme for memory chips, where prices have dropped to an extent that is causing massive losses for all industry players.

3. And finally, there's a drop in demand from end users. Some of it may also be linked to delayed purchases, but some of it may last as a consequence of the current downturn.

The first reason will definitely not last. The second cannot last for long, but may not be resolved until a year or two down the road. How the third reason plays itself out is anybody's guess.

But all in all, it is highly likely that the situation will start to stabilise over the next few months (as in: production and export will still be down yoy, but the percentages will be much lower than the disastrous Jan/Feb figures).

A few days ago, Taiwan's premier told parliament that he will resign if GDP drops by more than 5 %.

There's little doubt that Taiwan's 2009 GDP will drop sharply, but he might still have a chance of keeping his job. It will be a close call, but it's still a possibility.