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Taiwan GDP Q1 2021

Taiwan: Economy records fastest expansion in over a decade in Q1

GDP growth sped up to 8.2% year-on-year in the first quarter, from 5.1% in the fourth quarter of last year, making Taiwan’s economy one of Asia’s star performers so far in 2021. Q1’s reading marked the fastest expansion since Q3 2010.

Private consumption rebounded in the first quarter, growing 2.1% year-on-year and marking the best reading since Q4 2019 (Q4 2020: -1.1% yoy), amid improved consumer sentiment and the government’s skillful handling of the pandemic. Similarly, total investment rebounded in Q1, expanding 8.3% (Q4 2020: -1.0% yoy) amid stronger spending on machinery, transportation and construction. Government spending growth, meanwhile, edged down to 4.3% in Q1 (Q4 2020: +4.4% yoy).

Growth in exports of goods and services accelerated to 19.6% in Q1 from 5.7% in the previous quarter, amid surging foreign demand for electronics. Meanwhile, imports soared 14.6%, contrasting Q4’s 2.9% decline.

On a seasonally-adjusted quarter-on-quarter basis, economic growth picked up to 3.1% in Q1 from 1.4% in the previous quarter.

Looking ahead, the economy is likely to continue performing well this year due to a vibrant semiconductor industry, with Q2’s annual GDP reading also likely to benefit from a favorable base effect.

Ho Woei Chen, economist at United Overseas Bank, was upbeat about the outlook:

“Reshoring of Taiwanese companies and increased production capacity from new investments are expected to sustain this growth momentum. Moreover, major chipmakers in Taiwan have announced large increases in their capital investment this year to meet strong demand for chips. […] We expect the significant outperformance in 1Q21 GDP to place Taiwan’s economy on track for 6.5% growth this year with potential upside risk should the electronics demand gather steam in the coming months.”

However, Iris Pang, chief greater China economist at ING, was somewhat less positive:

“We think that Taiwan’s strong economic growth may not last. Water shortages, which are a climate issue that the government can’t control, have affected Taiwan’s semiconductor chip production. […] We have revised our Taiwan GDP forecast for 2021 to 4.9% from 4.3% solely due to the unexpectedly strong growth in the first quarter. We will monitor the chip production and export problem, and the possibility of a downgrade to our forecast is higher than the possibility of an upgrade, which is climate dependent.”

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