Taiwan: Economic activity accelerates in Q4
The economy grew 3.4% in the final quarter of 2019 compared to the same period a year earlier, according to an advance GDP estimate, up from the third quarter’s 3.0% increase. On a seasonally-adjusted quarter-on-quarter basis, growth rose to 1.7% in Q4, up from 0.6% in Q3. As such, the estimate for Q4 implies overall growth of 2.7% for 2019, marginally below the reading from 2018.
On the domestic side of the economy, gross capital formation rebounded strongly, jumping 10.7% in Q4 and contrasting Q3’s 0.9% contraction. The figure was likely driven by reshoring of capital by Taiwanese companies, spurred by government measures such as Invest Taiwan that aim to attract overseas investment via various financial incentives. Meanwhile, private consumption increased 2.9% in Q4 in year-on-year terms, up from 2.3% in Q3. Contrastingly, government spending slowed to 1.9% in Q4, down from 3.8% growth in Q3.
On the external side, exports of goods and services increased 2.3% in Q4, up from 0.3% in Q3 and marking the highest reading since Q2 2018. Imports rose 4.3% in Q4, contrasting the 2.3% decline registered in the previous period. As a result, the external sector detracted 0.7 percentage points from economic growth in Q4, contrasting the 1.5 percentage-point contribution in Q3.
Moving forward, economic growth is likely to dip this year on slower growth in key trading partners China and the U.S. However, trade diversion from China and robust domestic demand should support activity.