Taiwan: Growth set to slow down after a strong Q2

3 min
Manfred Stamer
Manfred Stamer Senior Economist for Emerging Europe and the Middle East

The economy has surprised on the upside so far in 2019 as unexpectedly strong real exports and investment boosted GDP growth to +2.4% y/y in Q2, after +1.8% in Q1. Higher tariffs on mainland Chinese exports have prompted Taiwanese companies to move investment and production back home from the mainland. As a result, exports to the U.S. have been boosted, in particular by surging shipments of information and communication prod­ucts. Hence, USD-denominated exports of goods fell at a slower pace of -1.2% y/y (or a +2.3% y/y gain in TWD) in Q2 and increased by +1.2% y/y in July, compared with a -4.7% y/y drop in Q1. Coupled with a +19% y/y rise in tourist arrivals, this resulted in a +4.1% y/y expansion in real exports of goods and services and a +6% increase in fixed investment in Q2. That said, the recent export recovery may prove short-lived amid increasing external uncertainties, including the prolonged uncertainty in U.S.-China trade tensions with new tariffs added as well as the trade conflict between Japan and South Korea. We forecast full-year growth of +1.8% in 2019 and +1.1% in 2020.