Taiwan's export-led economy contracted a record 10.24 per cent in the first quarter, but officials said they believed the recession had hit bottom and expected growth to return by the fourth quarter. 'Although the first-quarter gross domestic product growth was minus 10.24 per cent, we feel the contraction already has hit bottom,' Shih Su-mei, the director-general of budget, accounting and statistics, said yesterday. Ms Shih said the shrinkage would diminish gradually in the second and third quarters as global demand and domestic investments increased slowly. The sharp contraction in the first quarter was the worst showing since official records began in 1961. The statistics agency also lowered the island's full-year forecast to a contraction of 4.25 per cent, down from its February forecast of a 2.97 per cent decline. 'The financial tsunami has seriously battered global growth and its power is far bigger than all countries expected, resulting in the sharp drop in global demand and our exports,' said Ms Shih. She said exports, which contribute up to two-thirds of GDP growth, dropped 36.65 per cent in the first quarter against February's forecast of a 31.81 per cent contraction. 'This is also a record drop in Taiwan, and this is the major reason for the record GDP contraction in the first quarter,' she added. Ms Shih also said the sharp decline in exports seriously affected domestic investments and production on the island, with private investment shrinking 43.35 per cent in US dollar terms, and production falling 33.45 per cent. However, the agency forecast GDP would fare better beginning in the second quarter with a smaller contraction of 8.5 per cent, followed by an even smaller 2.98 per cent contraction in the third quarter before rebounding to 5.2 per cent in the final quarter. Premier Liu Chao-shiuan said that although the economy performed badly in the first quarter, he was confident there would be growth beginning in the fourth quarter. 'Our economy will start to show some improvement in the third quarter onwards, although we will still see an economic contraction for the full year,' Mr Liu told reporters. Taiwan has introduced NT$858.5 billion (HK$204 billion) of spending over four years, about 6 per cent of GDP, on infrastructure, consumer grants and tax cuts. It has also issued NT$82.9 billion worth of shopping vouchers for the public to spark domestic consumption. The global slump has badly affected economies across Asia, with Japan reporting a record 15.2 per cent contraction in the first quarter, Singapore suffering a shrinkage of 10.1 per cent, South Korea dipping 4.3 per cent and Hong Kong falling 7.8 per cent. The recovery in the mainland economy has already started to lose momentum and could be further hit by slowdowns in select retail segments and declines in power consumption, according to Dong Tao, the chief regional economist at Credit Suisse.