Taiwan's economy shrank for the first time in six years in the July-September quarter, dragged down by worse-than-expected exports and domestic spending, the government said Friday.
The drop of 1.01 percent from a year earlier missed forecasts by the Directorate General of Budget, Accounting and Statistics, which had predicted GDP growth of 0.10 percent year-on-year in the third quarter.
It was also a steeper drop than the 0.5 percent decline forecast by a Bloomberg survey of economists.
Taiwan has been struggling to spur growth in its export-focused economy, badly hit by a weak recovery following the global financial crisis and greater competition in the technology sector -- which it has traditionally been heavily reliant on.
Taiwan's central bank cut its key interest rate in September, the first time in four years, in an attempt to bolster sluggish demand.
In August, the island halved its economic growth forecast for the full year to 1.56 percent, from an earlier estimate of 3.28 percent.
Increased competition from China's burgeoning tech industry is putting particular pressure on Taiwan.
Leading Taiwanese firms such as Foxconn and TSMC are reportedly suppliers to tech giant Apple and have benefited from the launch of its new smartphone models.
But China has been pushing to grow its own tech industry with the development of domestic smartphone brands and homegrown hardware, including chips.