Taipei - Taiwan's economy shrank a record 8.36 per cent in the fourth quarter and was expected to contract 2.97 per cent this year, reflecting the battering the island is taking in the global economic downturn, a government agency said Wednesday.

The declines in the gross domestic product (GDP) was due mainly to the hit Taiwan's exports and industrial production has taken in the global slump and a resulting shrinking of domestic investments, the Directorate General of Budget, Accounting and Statistics said.

The agency provided the year-on-year fourth-quarter drop as well as revised its GDP contraction for the third quarter, increasing it
0.03 percentage points from its November estimate to 1.05 per cent.

For all of 2008, the agency reported 0.12-per-cent GDP growth.

Inflation in the fourth quarter rose 1.87 per cent, and for all of 2008, it surged 3.53 per cent while per-capita income amounted to 17,576 US dollars, the agency said.

For 2009, the agency forecast the island's inflation to plunge by 0.82 per cent and per-capita income to drop to 15,957 US dollars.

In response to the economic contraction, Taiwan's central bank cut its benchmark rate by 25 basis points to a record low of 1.25 per cent, its seventh cut since the island was hit by the global financial turmoil and downturn in September. (dpa)