Cityscape at night in Taiwan

Taiwan GDP Q1 2020

Taiwan: Economic growth drops to four-year low in Q1 as domestic activity falls

The economy expanded 1.6% in the first quarter compared to the same quarter last year, according to a second GDP release. This was marginally above than the preliminary 1.5% reading but well below the 3.3% expansion recorded in the fourth quarter of 2019 and the lowest reading since Q1 2016. On a seasonally-adjusted, quarter-on-quarter basis, activity shrank 0.9% in Q1 2020 (previously reported: -1.5% s.a. qoq), contrasting the 1.6% expansion in Q4 2019 and marking the sharpest contraction in almost five years.

Domestic activity drove the slowdown, with private consumption falling 1.6% in the quarter (Q4 2019: +3.0% year-on-year), marking the first contraction in over a decade as households held back on travel, cultural and recreational spending due to the pandemic. Moreover, fixed investment growth slowed to 3.6% in Q1 (Q4 2019: +14.7% yoy) as heightened uncertainty hit business confidence. In contrast, government consumption rose 3.4% (Q4 2019: +1.8% yoy) on the back of fiscal stimulus measures.

The external sector, however, softened the overall slowdown in the first quarter, contributing 0.5 percentage points to the headline reading. Exports fell 2.4% in the quarter (Q4 2019: +2.4% yoy) as external demand diminished in the face of the pandemic, but this was paired with a sharper fall in imports (Q1: -3.9%; Q4 2019: +4.3% yoy) as domestic demand dropped significantly in the quarter.

Looking ahead, economic activity is likely to contract in the second quarter of this year, as slackening demand weighs heavily on the external sector. However, the country’s successful response to the viral outbreak should see its economy fare reasonably well compared with regional neighbors, with manufacturing activity remaining relatively unaffected by lockdown measures.

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