Taiwan: Revised data confirm softening growth in Q1
May 26, 2017
Taiwan’s GDP increased 2.6% year-on-year in the first quarter of the year, as confirmed by a complete set of data released by the Directorate General of Budget Accounting and Statistics (DGBAS) on 26 May. The reading, a deceleration from Q4’s revised 2.8% expansion (previously reported: +2.9% yoy), was driven by steady domestic consumption growth and a pickup in exports on the heels of stronger external demand for electronic components. Despite the slight deceleration in the headline figure, quarterly data suggest that the economy has started the year on a strong note. The seasonally-adjusted quarter-on-quarter expansion was revised from an initially reported 0.7% increase to a 0.9% rise, the best reading in a year and well above Q4’s 0.4% expansion.
The trade-reliant economy has proven resilient to the plunge in visitor arrivals caused by Chinese restrictions on group tours to Taiwan. Indeed, benefiting from increased demand overseas for high-tech components, exports only experienced a mild slowdown. Comprehensive data showed exports expanding 7.4% in Q1 (previously reported: 7.0% yoy), down from the 8.0% expansion in Q4 2016. However, with the increase in imports larger than initially estimated—imports were previously reported to have grown 7.2% while the second estimate showed growth of 7.7%—the net contribution of the external sector to overall growth swung from a 0.5 percentage-point subtraction in Q4 to a revised 0.2 percentage-point addition in Q1 (previously estimated: +0.3 percentage points).
Meanwhile, the headline figure was heavily dragged on by a plunge in government consumption, which was revised downwards to a 4.8% plunge (previously reported: -4.7% yoy). The rest of the economy fared better in Q1. Private consumption growth was unchanged at Q4’s 2.0% expansion—both were revised upwards from the 1.6% expansions previously reported—while fixed investment proved resilient in Q1 at a 4.1% increase (Q4 2016: +5.8% yoy), with machinery and equipment investment in particular showing strong momentum.
While the revision provides little in terms of new information, it does confirm the strong footing with which Taiwan has entered this year. In line with this, the DGBAS revised their forecast upwards and now expects the economy to expand 2.1%. Likewise, the strong economic performance has prompted FocusEconomics panelists to revise their forecasts for this year in our last report. Nonetheless, economic trouble is brewing ahead, with demand for high-tech components from mainland China—the linchpin of economic growth in Q1—likely to decrease in Q2 following the end of the Lunar New Year. Our panel expects this to weigh heavily on growth, with GDP seen expanding only 2.2% in the second quarter.
Author: David Ampudia, Economist