- Seasonally adjusted annual growth rate actually fell
- Lockdown cut in consumption blamed for deceleration
Taiwan’s economy grew at a slower pace in the second quarter as a sudden spike in domestic COVID-19 cases weighed on consumption, though the island’s hi-tech exports remained strong as the global “work from home” boom shows no sign of easing.
Gross domestic product (GDP) grew 7.47% in April-June from a year earlier, preliminary data from the statistics agency showed on Friday.
The reading was well above the 6.05% increase forecast in a Reuters poll, but down from the first quarter’s 8.92% rise.
Compared with the first quarter, the seasonally adjusted annual rate of growth declined 7.86% in the second quarter, compared to a 12.93% gain in the first quarter.
The government attributed the slower headline growth rate to a drop in consumption after it imposed curbs on personal gatherings, closed entertainment venues and restricted restaurant operations to contain a sudden surge in COVID-19 cases. The outbreak has since been contained and restrictions were eased this week.
“Growth was partially offset by consumption, which was hit by the local epidemic,” the statistics agency said in a statement, pointing to a 0.55% yearly decline in domestic consumption.
However, exports continued to surge on demand for electronics, driven by new technologies such as 5G and by people working from home due to the coronavirus pandemic. Pent-up demand in countries emerging from lockdowns has also boosted sales, while microchip prices are surging due to a global shortage.
Total exports rose 37.35% in the second quarter year-on-year in U.S. dollar terms, while exports of electronics components rose 31.09% and those of communication and audio-visual products leapt 28.74%, the agency said.
Tai Hsi-ting, an analyst at Cathay Securities in Taipei, said strong electronics exports were likely to moderate in the third quarter as more countries relax COVID-19 curbs and workers returned to their offices.
He expected Taiwan’s economy to grow around 5% this year.
The tech-powerhouse island, home to the world’s largest contract chipmaker Taiwan Semiconductor Manufacturing Co Ltd (TSMC), has benefited from global demand for smartphones, tablets and computers from people forced to study and work from home in large parts of the world.
A global shortage of chips for everything from cars to consumer electronics has also bolstered demand for made-in-Taiwan semiconductors, with producers rapidly expanding capacity.
Riding on that trend, Taiwan’s stock market is the best performing emerging market in Asia so far this year, gaining 17%.
Taiwan has also benefited from a strong economic recovery in China, the island’s top trading partner, though its growth rates are slowly returning to pre-pandemic levels.
Revised GDP figures, including growth estimates for the full year, will be released later in August.