Taiwan's trade-dependent economy unexpectedly contracted in the fourth quarter, reflecting its worst performance in 13 years, hit by a drop in exports on slowing global tech demand and COVID-related chaos in its largest market China.

For the October-December period, annual gross domestic product (GDP) contracted by 0.86% from the same period a year earlier, compared with 4.01% growth for the previous quarter, revealed preliminary data from the statistics agency showed on Wednesday.

That was worse than an increase of 1.3% forecast in a Reuters poll, and the worst quarterly performance since the economy contracted 1.13% in the third quarter of 2009, when the world was dealing with a financial crisis.

Compared with the previous quarter, Taiwan's economy contracted 4.24% at a seasonally adjusted annual rate.

"External demand has weakened significantly," said the Directorate General of Budget, Accounting and Statistics, pointing to global inflation and rising interest rate suppressing demand, and "the deterioration of the pandemic in mainland China interfering with consumption and production activities".

For all of 2022, the economy expanded a preliminary 2.43%, compared to 6.53% logged for 2021. That was slightly slower than last year's 3% growth recorded in China, which was hit hard by stringent COVID-19 curbs and a property market slump.

Taiwan's total fourth-quarter exports dropped 8.63% from a year earlier in terms of U.S. Dollars, the agency said.

As a key hub in the global technology supply chain for giants such as Apple Inc, Taiwan's economy had outperformed many regional peers during the pandemic as it benefited from robust demand for tech exports as more people turned to working and studying from home.

But global economic woes driven by soaring inflation and the impact of the war in Ukraine, as well as China's pandemic situation, has impacted demand for made-in-Taiwan goods.

Taiwan will release revised GDP figures at a later – yet to be set – date, including full-year growth forecasts for 2023. In November, the statistics agency revised down its full year 2023 outlook to 2.75% from a previous forecast of 3.05%.