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Asia, News

Taiwan Q4 GDP expands at strongest rate since mid-2018

(Recasts, adds details)

* Q4 GDP +3.38% y/y vs Q3 +2.99% (Reuters poll +2.78%)

* 2019 growth at 2.73% vs earlier govt estimate of 2.64%

* Analysts expect growth to continue this year

TAIPEI, Jan 21 (Reuters) – Taiwan’s economy grew at the fastest pace in one-and-a-half years in the fourth quarter of 2019 as a recovery in electronics demand boosted the island’s manufacturers amid easing concerns over a U.S.-China trade war.

The outlook for the export-reliant economy has brightened this year after its two largest trading partners, China and the United States, signed a first phase trade agreement this month after a bruising tariff war that disrupted global supply chains. Stronger demand for high-end smartphones and factory relocations to Taiwan from China have also helped stabilise growth.

Gross domestic product (GDP) expanded 3.38% in the October-December period from a year earlier, preliminary data showed on Tuesday, up from 2.99% in the third quarter. Growth in the final quarter was the fastest since 3.4% in the second quarter of 2018 and surpassed economists forecast of 2.78% in a Reuters poll.

For the full-year of 2019, growth was 2.73%, the statistics agency said. That compared with the government’s upwardly revised forecast of 2.64%.

In 2018, the economy expanded 2.75%, according to the latest government data.

Analysts expect the growth momentum to continue in 2020 helped by recovering sales for high-end smartphones and rising technology demand driven by new technologies, including fifth-generation (5G) telecommunications technology.

Despite its heavy reliance on exports, Taiwan’s economy bucked a regional growth slowdown last year. It was named in a U.N. study as the largest beneficiary of “trade diversion” from the U.S.-China trade war, as manufacturers moved production from China to Taiwan to avoid higher tariffs.

Taiwan has predicted stable growth of 2.72% in 2020, citing “positive effects” of factory relocations.

In a further sign of recovering demand, Taiwan’s export orders in December rose for the first time in 14 months, boosted by a pick-up in global demand for electronics.

Export orders are a leading indicator of actual shipments from Taiwan and other Asian manufacturing economies in two to three months.

Taiwan Semiconductor Manufacturing Co , the world’s largest contract chipmaker, last week forecast that its first-quarter revenue could rise by up to 45% and raised its capex plan for the year, betting on robust demand for 5G smartphones.

Some analysts, however, remain cautious about Taiwan’s growth prospects, especially on the government’s pledge to lure manufacturers to move production home from China.

Taiwan’s government said last month returning investment to Taiwan from China totalled T$830 billion ($27.72 billion).

“We have doubted the success of this investment policy for several months and are still sceptical of its effectiveness in supporting the Taiwan economy,” ING economist Iris Pang wrote in a report earlier this month.

($1 = 29.9400 Taiwan dollars) (Reporting by Yimou Lee and Emily Chan; Additional reporting by Ben Blanchard; Editing by Jacqueline Wong)


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