GDP growth records fastest expansion since Q2 2021 in the second quarter

GDP reading: GDP growth picked up to 8.0% year on year in the second quarter from 5.5% in the first quarter. Q2’s reading marked the strongest growth since Q2 2021 and was well above market expectations. On a seasonally-adjusted quarter-on-quarter basis, economic growth sped up to 3.1% in Q2, up from the previous quarter's 1.8% expansion and marking the best result since Q4 2023. In the second quarter, booming IT exports drove the economy, outweighing sluggish private and government spending.

Exports in the driving seat: Private consumption growth fell to 0.6% year on year in Q2, marking the weakest expansion since Q3 2021 (Q1: +1.4% yoy). Public consumption accelerated to a 2.8% expansion in Q2 (Q1: +0.4% yoy). Total investment rose 5.6% (Q1: +16.0% yoy). On the external front, exports of goods and services growth accelerated to 35.1% year on year in the second quarter, which marked the best reading since Q1 2010 (Q1: +20.3% yoy). In addition, imports of goods and services growth sped up to 32.0% in Q2 (Q1: +24.4% yoy).

Slowdown on the cards: As frontloading runs its course, a slowdown in exports should cause overall GDP growth to ease in Q3, though buoyant global AI demand will continue to gird the export sector.

Panelist insight: On the reading, ING’s Lynn Song said: “Taiwan's economy has fared far better than many market participants had expected at the start of the year. The heavy demand driven by the AI boom, combined with the fear of incoming tariffs, led to blistering export growth year to date. A 51.3% YoY growth of exports to the US in the first half of the year, punctuated by a whopping 90.9% YoY growth in June, proved to be a major driver of overall export growth. While Taiwan's export growth to other regions has been impressive as well, much of the growth can be attributed to the surge in US demand this year.”

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