Taipei - Taiwan's economy, hit hard by the global financial turmoil and a slump in exports, contracted in the third quarter, signaling the start of recession, officials said Thursday.

"We have to revise downward our third-quarter growth to negative 1.02 per cent from 3.04 per cent forecast in August, and this is the biggest decline since the fourth quarter of 2001," said Shih Su-mei, head of the Directorate General of Budget, Accounting and Statistics.

It was the first contraction since 2003, and the economy was also expected to shrink in the fourth quarter and the first quarter of 2009, Shih said. A recession is defined as two-straight quarters of negative growth.

The third-quarter decline forced the island to revise downward its full-year economic growth forecast to 1.87 per cent from the 4.3 per cent expected in August, Shih said. For 2009's growth, she said the most optimistic forecast would be 2.12 per cent.

Taiwan registered 5.72-per-cent growth last year, but the worldwide economic slump has impacted the island's economy and undermined its growth prospects.

To try to stimulate its growth in its gross domestic product, the government announced Tuesday the issuance of 2.5 billion US dollars of shopping vouchers to Taiwanese citizens in a bid to stimulate domestic consumption. (dpa)