GDP grows at softest pace since Q3 2023 in the fourth quarter

GDP reading: GDP expanded 1.8% year on year in Q4 (Q3: +4.2 yoy), marking the worst result since Q3 2023 and undershooting market expectations. The external sector subtracted heavily from growth despite strong exports, partly offsetting buoyant domestic demand. On a seasonally-adjusted quarter-on-quarter basis, economic growth picked up to 0.5% in Q4 from the previous quarter's 0.2% increase.

Investment and exports drive economy: Household spending growth fell to an over two-year low of 1.9% in Q4 (Q3: +2.3% yoy), while government spending growth waned to 2.3% in Q4 (Q3: +4.0% yoy). Investment was much stronger, increasing 17.5% (Q3: +17.5% yoy), likely thanks to investment by semiconductor firms. On the external front, exports of goods and services growth was 8.2% in Q4 (Q3: +8.9% yoy), buoyed by strong demand for the country’s IT goods. Finally, imports of goods and services growth picked up to 18.3% in Q4 (Q3: +14.7% yoy).

GDP outlook: Our Consensus is for economic growth to accelerate in year-on-year and quarter-on-quarter terms in Q1 2025.

Panelist insight: On the reading and outlook, ING’s Lynn Song said: “The outlook remains quite solid to start the year, and Taiwan continues to have much going in its favour. Taiwan remains one of the key beneficiaries of the global AI race; earlier released December industrial production data showed blistering growth of 58.8% YoY for Computers, Electronic & Optical Products and 37.5% YoY for semiconductors. The conditions are still in place for consumption growth to continue, as another minimum wage hike took effect at the start of this year, and as strong corporate earnings should at least offer a backdrop for continued wage growth as well.”

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