Economy records quickest upturn since Q1 2024 in the first quarter

GDP reading: GDP growth improved to 5.4% year on year in the first quarter, from 2.9% in the fourth quarter of last year. The reading was well above market expectations, and was driven by bumper readings for fixed investment and exports. This was linked to strong global demand for the country’s IT and electronics, and to firms front-loading shipments ahead of U.S. tariffs. On a seasonally-adjusted quarter-on-quarter basis, economic growth accelerated to 2.3% in Q1, compared to the previous quarter's 1.6% increase.

Investment and exports are key drivers: On the domestic front, investment was the star performer, rising 14.7% year on year (Q4: 19.2% yoy). In contrast, private consumption growth fell to 1.2% in Q1 (Q4 2024: +2.5% yoy). Government spending grew 0.5% (Q4 2024: +2.1% yoy). On the external front, exports of goods and services growth improved to 20.1% year on year in the first quarter, which marked the best reading since Q2 2021 (Q4 2024: +8.9% yoy). In addition, imports of goods and services growth sped up to 23.7% in Q1 (Q4 2024: +18.3% yoy), marking the best reading since Q2 2010; imports growth was likely linked to capital imports for the IT sector.

Panelist insight: On the outlook, Nomura analysts said: “We believe the strong AI investment cycle will likely support our […] 2025 GDP growth forecast of 3.1% though quarter-on-quarter growth momentum might be volatile. Continued front-loaded demand for tech and chip products (though the effects may not be as strong as in Q1) and NVIDIA’s Blackwell shipments may be tailwinds for Taiwan’s exports, even though uncertainty from the tariff shock persists.” On trade, ING’s Lynn Song said: “We suspect that Taiwan should be among the economies able to strike some form of trade deal [with the U.S.], given the semiconductor giant, TSMC's high profile announcement of investment into US manufacturing faciltiies is exactly the sort of action the Trump administration has been seeking, and many of Taiwan's key exports to the US such as semiconductors and computer products are either strategically important or sensitive to consumers.”

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