Taiwan: GDP growth loses steam in Q2 but beats market expectations
GDP reading: The economy softened in the second quarter, with GDP expanding 5.1% year on year (Q1: +6.6 yoy). However, the reading was above market expectations. The slowdown was due to softer readings for private spending and net trade, which more than offset stronger figures for public spending and investment. On a seasonally-adjusted quarter-on-quarter basis, GDP recorded a flat reading in Q2, following the previous quarter’s 0.3% expansion and marking the worst reading since Q1 2023.
Drivers: Private consumption growth fell to 2.7% in Q2, marking the weakest expansion since Q1 2022 (Q1: +4.4% yoy). Public consumption, meanwhile, sped up to a 2.0% expansion in Q2 (Q1: +1.2% yoy). Investment clocked a 15.3% expansion in the second quarter, contrasting Q1’s 4.9% fall. On the external front, exports of goods and services increased 7.9% on an annual basis in the second quarter, which was below the first quarter’s 9.1% expansion. Conversely, imports of goods and services growth picked up to 10.6% in Q2 (Q1: +0.8% yoy).
GDP outlook: Annual GDP growth will likely slow in Q3 on a tougher base of comparison, but should continue to be buoyed by surging global AI demand.
Panelist insight: On the reading and outlook, ING’s Lynn Song said:
“The AI boom continued to be the main driver of growth in Taiwan, given its leading position in the semiconductor industry. AI-related demand contributed to both exports as well as gross capital formation in the second quarter. […] Taiwan’s data has come in stronger than expected for the last several months, and after the beat of the second quarter GDP and continued recovery of the leading index, we believe an upgrade of the full-year GDP forecast is in order. As such, we upgrade our 2024 GDP forecast from 3.8% YoY to 4.6% YoY.”
United Overseas Bank’s Ho Woei Chen said:
“Notwithstanding the negative contributions of net exports in 2Q24, we remain positive on Taiwan’s export outlook in the second half of the year. Taiwan’s manufacturing PMI has reverted to expansion territory in 2Q24 following a long period of contractions since Jun 2022. Private consumption is also expected to stay resilient amid the positive export and investment environment. Meanwhile, the recovery in the tourism sector is ongoing with total international arrivals at 2/3 of their pre-Covid level in the first four months of this year.”