Taiwan: Economic growth accelerates in Q3 2019
The economy expanded 2.9% in the third quarter compared to the same quarter a year earlier, according to an advance GDP estimate, up from the second quarter’s 2.4% increase. On a seasonally-adjusted quarter-on-quarter basis, growth accelerated to 1.1% in Q3, up from 0.7% in Q2.
Private consumption increased 2.0% in Q3 in year-on-year terms, up from 1.6% in Q2, supported by rising real wages. Moreover, government spending climbed 3.7% in Q3, contrasting the 2.7% drop in Q2 and marking the fastest increase since Q4 last year. Iris Pang, economist at ING, commented: “We believe this [government] spending includes subsidies to preferential investments, which has prompted some Taiwanese manufacturers to move their production lines from Mainland China to Taiwan”. Gross capital formation, however, fell 1.0% in Q3, contrasting the 5.9% rise in Q2, although this was largely due to a very high base effect.
On the external front, exports of goods and services increased 4.2% in Q3, up from 4.1% in Q2 and marking the highest reading since Q2 last year. Imports rose 2.2% in Q3, down from 3.7% in Q2. Overall, the external sector contributed 1.6 percentage points to economic growth in Q3, up from the 0.7 percentage-point contribution in Q2.
Moving forward, economic growth is likely to face headwinds from the ongoing U.S.-China trade war and weaker demand for new smartphones, which could negatively affect manufacturing output and exports.