TAIPEI (Reuters) -Taiwan’s economy grew at a slower pace in the first quarter compared with the previous three months but still performed better than expected, supported by strong tech exports and global chip demand, but growth could cool as the year progresses.
For the January-March period, annual gross domestic product (GDP) growth was put at 3.06%, compared with 4.86% for the previous quarter, preliminary data from the statistics agency showed on Thursday.
That was above an increase of 2.9% forecast in a Reuters poll, but was the slowest growth since the second quarter of 2020, when the economy grew 0.63% year-on-year.
As a key hub in the global technology supply chain for giants such as Apple Inc, Taiwan’s economy has outperformed many regional peers during the COVID-19 pandemic, benefiting from robust demand for tech exports as more people have turned to working and studying from home.
A global shortage of semiconductors has also filled Taiwan chip makers’ order books and driven them to expand production at home.
Taiwan’s exports rose 29.4% in 2021, and the economy continues to benefit from strong global demand for its high-tech goods and chips.
Total first-quarter exports soared 23.5% from a year earlier in U.S. dollar terms, the agency said.
It attributed the quarterly GDP growth to stronger-than-expected exports, driven by continued international demand for the island’s tech products including semiconductors.
A recovery in domestic consumption amid the relaxation of COVID-19 rules was offset by inflation, and consumption only grew marginally in the quarter, it added.
Kevin Wang, an economist at Taishin Securities Investment Advisory Co, said second quarter domestic demand may remain weak due to a recent spike in COVID-19 cases, but he was sticking to a 4.2% growth forecast for the quarter.
“As for exports, we need to watch whether U.S. consumer strength has been reduced due to worsening inflation, and whether the impact of China’s lockdown measures in response to the epidemic on the supply chain and production has expanded,” he said.
Statistics official Wu Pei-hsuan said the impact of the Shanghai lockdown would become apparent for Taiwan in the second quarter.
Capital Economics said it expected growth to slow from hereon, with a hit to consumption from Taiwan’s COVID-19 cases and a softening of exports “as higher inflation and rising interest rates weigh on demand in key export markets.”
China’s economy grew by a faster-than-expected 4.8% year-on-year in the first quarter, but slowed sharply in March as sweeping COVID-19 curbs, especially in Shanghai, and the Ukraine war disrupt production and weaken demand.
Taiwan will release revised GDP figures on May 27, including full-year growth forecasts for 2022.
(Reporting by Jeanny Kao and Yimou Lee; Additional reporting by Roger Tung; Writing by Ben Blanchard; Editing by Kim Coghill)
