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

GDP growth accelerated to 5.1% year on year in the final quarter of 2023, up from 2.3% in the third quarter and beating market expectations. Q4's reading marked the fastest expansion since Q2 2021. On a seasonally-adjusted quarter-on-quarter basis, economic growth ticked up to 2.1% in Q4, following the previous quarter's 1.9% increase. Q4's reading marked the fastest growth since Q4 2021.

Year-on-year private consumption growth fell to 5.4% in Q4, marking the weakest expansion since Q4 2022 (Q3: +9.2% yoy). That said, private consumption remained a key growth driver, aided by higher spending on transport, travel, recreation, vehicles and outbound tourism. Government spending rose 0.8% in Q4 (Q3: 0.0% yoy), while total investment contracted 8.7% (Q3: -12.3% yoy). Exports of goods and services rebounded, growing 3.6% year on year in the fourth quarter, which marked the best reading since Q2 2022 (Q3: -1.4% yoy). Higher tourism and AI-related exports drove the reading. In addition, imports of goods and services dropped at a softer rate of 4.3% in Q4 (Q3: -4.4% yoy).

Our Consensus is for strong annual growth in Q1. However, this will be due partly to a favorable base effect, and the economy is seen losing steam in quarter-on-quarter terms. Over 2024 as a whole, rebounds in exports and industrial output should drive an acceleration in economic momentum.

On the outlook, United Overseas Bank’s Ho Woei Chen said: “We see the low base of comparison and upturn in the global tech cycle providing a stronger boost. Near-term prospects for private consumption remain positive on the back of a firm labour market but private consumption growth may moderate following the strong recovery in 2023.” On the impact of supply disruptions in the Red Sea, DBS Bank’s Ma Tieying said: “The direct impact of the Red Sea crisis is expected to be minimal. Semiconductor supply chains are time-sensitive, and given the small and high-value nature of semiconductors, air freight is generally preferred for shipments. Industry reports suggest that nearly 100% of Taiwan's electronic component exports use air freight, while approximately 70% of its information and communication products exports also rely on air freight. Furthermore, Taiwan's trade dependence on Europe is not substantial.”

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