A wayward typhoon blew Taiwan, its economy and related exchange traded fund (ETF), off course, but the country could straighten itself out with some help.

Economists expect Typhoon Morakot to have a negative impact on third quarter GDP results because of damage to infrastructure, agriculture, tourism and several traditional industries, writes Lee Chyen Yee for Reuters. The government has vowed to spend $3 billion over the next three years for reconstruction.

A Reuters poll shows that Taiwan’s economy may suffer its largest contraction on record this year, but it could make a speedy recovery next year on post-typhoon reconstruction and increased exports to China and the United States, according to Alibaba. The poll forecasts a median 4.1% GDP contraction for 2009 and a 4.0% expansion for 2010.

The Taiwanese economy fell 7.5% year-over-year, its fourth straight quarterly annual decline, however, the drop was smaller than the first quarter’s 10.1% contraction, reports Daniel Ong Kian Hong for The Wall Street Journal. The quarterly expansion prompted the government to forecast a 4% decline for 2009, up from a previous 4.25% estimate.

Economists notice that Taiwan is exhibiting a “V-shaped” recovery similar to its neighbors. But unlike its neighbors, it is showing a weaker response among the Asian tiger economies. Further supporting a recovery, Taiwan’s big tech companies, who are traditionally the economy’s growth engines, have also been increasing capital-expenditure projections.

• iShares MSCI Taiwan Index (EWT): up 43.9% year-to-date

For more information on Taiwan, visit our Taiwan category.

Max Chen contributed to this article.

Tags: Asia, China, Emerging Markets, EWT, Global ETFs, Taiwan