Taiwan seen growing at slower pace in second quarter; strong exports support: Reuters poll

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FILE PHOTO: A person walks near containers at Keelung port, northern Taiwan
FILE PHOTO: A person walks near containers at Keelung port, northern Taiwan, October 30, 2015. REUTERS/Pichi Chuang

July 27, 2021

TAIPEI (Reuters) – Taiwan’s economy is expected to have expanded at a slower pace in the second quarter as a rare spike in COVID-19 cases hurt consumption, a Reuters poll showed, although a strong growth in exports supported the trade-reliant island.

Gross domestic product (GDP) likely expanded 6.05% in the April-June period versus a year ago, the poll of 12 economists shows, after it grew 8.92% year-on-year in the first quarter, the strongest quarterly growth in over a decade.

As a key hub in the global technology supply chain for giants such as Apple Inc, Taiwan’s economy has outperformed many of its regional peers during the pandemic as it benefited from robust demand for its tech exports.

But domestic consumption was hit by a rare spike in community COVID-19 transmissions in mid-May. The outbreak has now been brought well under control, with the alert level lowered and restrictions on gatherings and restaurant dining eased this week.

Economists’ forecasts for preliminary GDP data due on Friday varied widely from growth of 2.6% to as high as 7.2%.

“We do not think this epidemic outbreak will impact the recovery of domestic consumption,” Morgan Stanley analysts said in a note. “Strong global demand and domestic capital expenditure will be able to support Taiwan’s economic growth.”

Taiwan’s key semiconductor industry has been largely unaffected by the pandemic at home, and exports have remained strong. June exports rose 35.1% from a year earlier to $36.65 billion, the second highest monthly figure on record.

Last week, the Asian Development Bank raised its full-year GDP outlook for Taiwan to 5.6% from an earlier 4.6%, citing among other things “robust external demand”.

Taiwan has benefited from the work-and-study from home trend around the world, which has buoyed demand for laptops, tablets and other electronics made with components supplied by firms like Taiwan Semiconductor Manufacturing Co Ltd (TSMC).

The economy in China, Taiwan’s top trading partner, expanded more slowly than expected in the second quarter, as slowing manufacturing activity, higher raw material costs and new COVID-19 outbreaks weighed on the recovery momentum.

Taiwan’s preliminary figures will be released in a statement with minimal commentary. Revised figures will be released about two to three weeks later, with more details and forward-looking forecasts.

(Poll compiled by Carol Lee; Reporting by Yimou Lee; Editing by Himani Sarkar)