The official forecast for Taiwan’s economic growth has been cut by half to two per cent this year.
And it may fall well below that target if the island’s exports continue to shrink.
Many key industries are hit hard by the downturn, but some are bucking the trend, posting record sales.
Sales at department stores still draw large crowds and many are taking the chance to stock up on a year’s supply of cosmetics at a discount.
Convenience stores also seem immune to the current downturn.
Revenue for Taiwan’s 7-Eleven hit a record of $410 million in July, up 14 per cent on-year.
Professor Lin Chu Chua from the National Chengchi University explained: “You have to eat and live even in bad times. So the service sector is much more resilient and stable compared to other industries.”
Taiwan’s star industries seem to be bearing the brunt of the global slowdown.
July’s shipments of information and telecommunication products fell 35 per cent from a year ago.
This has driven the island’s overall exports into contraction for five straight months.
Professor Kenneth Lin from National Taiwan University said: “Our information industry depends mostly on exports to the US and Europe. Plus, our exports rely too much on these star industries. So when the global economy takes a turn for the worse, our economy suffers immediately.”
As the European crisis continues to weigh on global demand, analysts say it’s time for Taiwan to shift its economic focus.
For starters, the island should start building momentum in the service sector.
Professor Lin Chu Chia said: “The up side about service sector is that it creates many job opportunities. The down side is that its growth rate will be slow but consistent. So if we focus on the service sector, the island’s economic growth will slow down a bit.”
But that can be made up by the growing number of mainland visitors in the last four years.
Some four million Chinese tourists have visited Taiwan and brought in nearly $7 billion of tourism revenue.
This year, officials expect the number of mainland visitors will increase by two million.
Taiwan’s economic growth this year may be taking a hit but analysts say if the government takes the chance to fully develop its service industry, it would help Taiwan to ride out the global downturn, as well as to achieve sustainable growth.