Taipei, Sep 25 (IANS): Taiwan cut its policy rate by 12.5 basis points as part of measures to stimulate growth after the island's economic authority said it would be difficult to maintain the GDP growth rate above one percent this year.

Thursday's rate cut was the first rate cut in four years as Taiwan's latest economic data remained sluggish and its export-oriented economy is experiencing the sharpest contraction since the end of the 2008-09 global financial crisis, Xinhua news agency reported.

Taiwan's banking supervisory body said the widening output gap, meaning the actual GDP is still below its potential even when the island is fully employed, is the main reason for the rate cut.

According to Taiwan's statistics bureau, export orders registered the fifth consecutive monthly decline year-on-year and industrial production the fourth consecutive monthly drop year-on-year.

The bureau also reported the sixth consecutive month of drops in domestic commercial sales in August.

Following the rate cut, Taiwan's rediscount rate has dropped to 1.75 percent, rate on accommodations with collateral to 2.12 percent and rate on accommodations without collateral to four percent.