Taiwan’s economy contracts in second quarter

Taiwan said Tuesday that gross domestic product dropped 0.16% in the second quarter from the same period last year as the European debt crisis and weak global demand hurt exports. Exports declined 1.73% from the same period in 2011, according to the advance estimate by the government’s statistics bureau. “Export is still the key uncertainty. We don’t expect a massive rebound in the second half, given what’s going on in Europe,” it added. Taiwan ships intermediate goods, especially technology components, to China to turn into finished products for export to markets in Europe and the United States. Domestic consumption also declined 1.05%. The government predicted the economy would move back into positive growth in the second half, but cut its 2012 estimate to 2.02% growth from its 3.03% forecast in May. Taiwan is negotiating with China to allow its domestic banks to provide renminbi-denominated services, which is expected to yield additional profits for the financial sector. The influx of Chinese tourists to the island has also helped to prop up retail sales.