TAIPEI (Reuters) - Taiwan reported solid first-quarter economic growth on Friday as strong global demand for components for the new iPhone and other electronic gadgets keep Asia’s hi-tech factories humming.
The trade-reliant economy expanded for the fourth quarter in a row as export orders surged, and could pick up more momentum in coming quarters as vendors gear up for Apple Inc’s (AAPL.O) launch of the iPhone 8 later in the year.
The island’s gross domestic product (GDP) rose 2.56 percent in January-March from a year earlier, easing from 2.88 percent in the previous three months but still expanding a bit faster than expected.
Analysts polled by Reuters had seen growth of 2.45 percent.
“The data has exceeded our forecast...The government has room to raise its 2017 full-year target from 1.92 percent currently,” said Hsu Kuo-an, an analyst of Capital Securities in Taipei.
“The question is, will it be raised higher than 2 percent, as many institutions are expecting?”
Capital Economics said after the data that full-year growth could accelerate to 3 percent this year.
Taiwan posted strong exports in the first quarter “based on a global economic recovery, price rebounds for global commodities and continued strong semiconductor demand,” the statistics agency said in a statement.
On a seasonally adjusted quarterly revised (SAQR) basis, the economy grew 0.72 percent in the March quarter from 0.45 percent in the December quarter, the agency said.
A number of new tech product launches this year bode well for companies and economies in the global electronics supply chain.
China, Japan, South Korea and Singapore have also reported a rebound in exports in recent months, often led by electronics from cutting-edge memory chips to hard drives and flat screens.
But analysts cautioned Taiwan’s economy remains highly reliant on external demand, and it remains to be seen whether the benefits of the export boom will trickle through to domestic consumption.
Taiwan companies created new jobs at a strong pace in March, a private manufacturing survey showed recently.
However, concerns about a potential rise in U.S. trade protectionism continue to hang over Asia’s exporters, though the new Trump administration has taken a somewhat softer line than expected on regional powerhouse China so far.
Trump stunned South Korea on Friday when he said in an interview with Reuters that would “renegotiate or terminate” a free trade pact between the two countries.
Taiwan’s exports surged the most in six years in the first quarter, buoyed by strong demand from China and the United States, its top markets.
The government in February raised its 2017 full-year economic growth forecast to 1.92 percent due to more robust global demand.
In a bid to boost domestic consumption and make the economy somewhat less lopsided, Taiwan announced a T$882.4 billion (£22.47 billion) stimulus package in March, though the infrastructure spending will be spread over eight years, diluting its impact.
With the economic recovery on track, the central bank has left its policy rate steady for three meetings in a row, while keeping an eye on U.S. policy and any impact on exports from a more than 7 percent rise in the local currency so far this year.
Still, Taiwan is expected to raise interest rates at some point, economists said, especially with the U.S. Federal Reserve embarking on a slow but steady tightening cycle.
Economists at ANZ maintained their view that Taiwan’s economic conditions are ready for a central bank move as soon as June, predicting it will raise its policy rate by 12.5 basis points to 1.5 percent.
Editing by Kim Coghill