Taiwan: Economy expands at fastest pace in one and a half years in Q3
November 25, 2016
A more complete set of data showed that GDP increased 2.0% annually in Q3, which was revised slightly down from a flash estimate of 2.1% growth released by the Directorate General of Budget Accounting and Statistics (DGBAS) on 31 October. The result overshot a revised 1.1% increase in Q2 (previous reported: +0.7% year-on-year) and represented the fastest pace of expansion since Q1 2015. Economic growth gained momentum sequentially as well. GDP—adjusted for seasonal factors—expanded 1.0% over the previous quarter in Q3, which was well above the 0.1% rise in Q2.
The strong upturn continues to be driven by domestic demand and the details showed that private consumption gained momentum, expanding from 1.6% in Q2 to 2.5% in Q3. Government spending accelerated from a 2.0% rise in Q2 to a 3.6% expansion in Q3. Moreover, gross fixed investment in Q3 increased at the fastest pace in a year (Q3: +3.4% yoy; Q2: +0.2% yoy).
On the external front, exports of goods and services firmed up in Q3, growing 3.6% (Q2:+0.2% yoy), reflecting growing global demand for Taiwanese semiconductors. Imports also increased robustly due to stronger domestic demand. Imports rebounded from a 0.3% contraction in Q2 to a 5.3% expansion in Q3. The strong acceleration in imports prompted net exports’ contribution to overall economic growth to fall from a 0.3 percentage-point contribution in Q2 to a 0.9 percentage-point detraction in Q3.
Despite the encouraging result in Q3, the Taiwanese economy is likely to slow in the final quarter of 2016 as electronic parts manufacturers draw down inventories. Moreover, Taiwan’s economy is one of the most exposed to China’s, which is expected to slow in the fourth quarter as the government clamps down on overheated property markets.
Author: Ricardo Aceves, Senior Economist