Taiwan: Economy records slowest increase since Q2 2020 in the second quarter
August 12, 2022
GDP growth dipped to 3.0% year on year in the second quarter from 3.7% in Q1, marking the slowest increase since Q2 2020 and slightly undershooting market expectations. On a seasonally-adjusted quarter-on-quarter basis, economic activity declined 1.8% in Q2, contrasting the previous period's 1.6% increase. The weaker year-on-year and quarter-on-quarter readings were linked to the surge in domestic Covid-19 cases and lockdowns in China, which affected domestic and external demand respectively.
In annual terms, household spending growth hit an over two-year high of 2.9% in the second quarter, up from the first quarter's 0.6% but supported by a low base of comparison. Government spending bounced back, growing 6.4% in Q2 (Q1: -0.4% yoy). Meanwhile, fixed investment growth improved to 10.7% in Q2, from the 7.7% expansion recorded in the prior quarter, likely aided by strong investment in the semiconductor sector.
On the external front, exports of goods and services growth fell to 4.3% in Q2, marking the worst reading since Q3 2020 (Q1: +9.1% yoy). Conversely, imports of goods and services growth sped up to 8.8% in Q2 (Q1: +8.7% yoy).
On the outlook, the EIU said:
“We believe that the ongoing global chip shortage will continue to underpin gross capital formation (both fixed investment and inventory creation) in the coming quarters […]. New stimulus programmes supporting private consumption in the domestic tourism and retail sectors will also foster a sequential pick-up in household spending from July-September. However, a stronger headline recovery will be limited by relatively high domestic inflation readings, tighter credit conditions and weakness in the broader outlook for exports and industrial production.”
Author: Oliver Reynolds, Economist