Taiwan: Growth accelerates in Q4 2019
The economy expanded 3.3% in the fourth quarter compared to the same quarter a year earlier, according to a second GDP release. This was marginally lower than the preliminary 3.4% reading but above the 3.0% expansion recorded in the third quarter. On a seasonally-adjusted, quarter-on-quarter basis, growth accelerated to a revised 1.9% in Q4 (previously reported: +1.7% qoq), up from 0.6% in Q3 and marking the strongest expansion since Q1 2012. Meanwhile, full-year growth clocked in at 2.7% in 2019, marginally below 2018’s 2.8% expansion but matching the estimate from the preliminary release.
On the domestic front, gross capital formation spearheaded the upturn, soaring 15.0% in Q4 on a year-on-year basis (preliminary estimate: +10.7% year-on-year; Q3: +3.7% yoy). This was likely driven by a reshoring of capital by Taiwanese companies, spurred by government measures that aim to attract overseas investment. That said, consumption metrics were slightly less upbeat: Private consumption increased 2.6% in Q4 (preliminary estimate: +2.9% yoy), inching up from 2.5% in the prior quarter, while government spending slowed to 2.0% (preliminary estimate: +1.9% yoy), from 3.8% in Q3.
In contrast, the external sector’s overall contribution to growth deteriorated in the final quarter. Although export growth accelerated to 2.6% year-on-year (preliminary estimate: +2.3% yoy), having flatlined in Q3, import growth hit 4.4% in Q4 (preliminary estimate: +4.3% yoy) after contracting 2.6% in the previous quarter.
Looking ahead, the re-election of President Tsai in January signals a continuation of pro-growth policies that should support the economy. Strong demand for semi-conductor technologies is seen bolstering exports and supporting a projected rebound in manufacturing output, although external headwinds such as the development of U.S.-China trade policies and the recent coronavirus outbreak provide major risks to the outlook.