Taiwan: The economy bounces back in the second quarter
GDP grew 1.5% year on year in the second quarter, contrasting the 2.9% contraction recorded in the first quarter and close to double the growth that markets were expecting. On a seasonally-adjusted quarter-on-quarter basis, GDP expanded 1.7% in Q2, contrasting the previous period’s 0.6% decrease. Q2’s reading marked the best result since Q4 2021.
Household spending growth improved to 12.1% year-on-year in the second quarter, which marked the best reading since Q1 1990 (Q1: +6.5% yoy) and was likely supported by government cash handouts, low unemployment, and a post-pandemic spending boost. Spending on hospitality, recreation, vehicles and outbound tourism drove the reading. Public consumption growth moderated to 1.6% in Q2 (Q1: +3.7% yoy). Finally, total investment fell 13.4% (Q1: -3.2% yoy).
Exports of goods and services dropped at a slower pace of 6.6% in Q2 (Q1: -10.8% yoy), weighed on by soft global electronics demand and destocking by firms. Conversely, imports of goods and services declined at a quicker pace of 7.7% in Q2 (Q1: -4.0% yoy).
On the outlook, United Overseas Bank’s Ho Woei Chen said:
“The recovery in private consumption is expected to remain the main driver of Taiwan’s growth while much uncertainty remains for investments and exports. Capital investment will likely continue to be weak due to the slowdown in global electronics demand and weaker outlook for China’s economy. The [data is] continuing to offer little signs that the manufacturing sector will soon emerge from its slump, led by the downturn in the electronics industry. Electronics account for more than 40% of Taiwan’s exports. Having said that, Taiwan’s exports peaked in mid-2022 and the high comparison base will continue to ease and become less of a drag to the headline export performance in 2H23.”