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Taiwan: Economy contracts in Q3 as weak foreign demand weighs on the economy

November 27, 2015

In the third quarter of 2015, GDP contracted 0.63% over the same period of the previous year, according to official data released by the Directorate General of Budget, Accounting and Statistics (DGBAS) on 27 November. The reading came in above the advanced estimate of a 1.0% contraction, but contrasted Q2’s revised 0.57% growth (previously reported: +0.52% year-on-year). In addition, the result marked the weakest expansion since Q3 2009.

Q3’s downturn came on the back of a sharp slowdown in private consumption and a negative contribution from the external sector. The economic cooldown affecting the global economy and Taiwan’s trading partner, namely China, resulted in weak demand for electronic products. According to the press release, the Taiwanese economy also suffered from, “the crowding out effects of the expanded supply chain in China and failing prices of oil.” Private consumption growth dropped from 3.6% in Q2 to 0.5% in Q3 as consumers are growing weary of the current economic outlook. Q3’s reading was the lowest since Q2 2009.

On the external front, exports of goods and services deteriorated markedly, contracting 3.0% in Q3. The result marks a deterioration from Q2’s 0.7% drop (previously reported: -1.3% yoy) and was the worst result in six years. In addition, imports swung to a 2.2% contraction (Q2: +3.4% yoy). As a result, the external sector’s net contribution to overall economic growth went up from the minus 2.7 percentage points registered in Q2 to minus 0.8 percentage points in Q3.

On a sequential basis, GDP fell 0.3% over the previous period in seasonally-adjusted terms, which marked an improvement from the 1.1% drop observed in the second quarter of the year.

As a result of the weak third quarter reading, the government downgraded its GDP forecast. The government now sees the economy expanding 1.06% in 2015 (previous estimate: +1.56%). In 2016, the government sees GDP growing 2.32% as Taiwan’s trading partners are expected to recover (previous estimate: +2.70%). FocusEconomics Consensus Forecast panelists project GDP to grow 1.2% this year, which is down 0.3 percentage points from last month’s forecast. For 2016, the panel estimates that economic activity will increase 2.5%, which is down 0.1 percentage points from last month’s forecast.


Author: Jean-Philippe Pourcelot, Economist

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Taiwan GDP Q3 2015 0

Note: Year-on-year changes of GDP in %.
Source: Directorate General of Budget, Accounting and Statistics (DGBAS) and FocusEconomics Consensus Forecasts.


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