Reuters logo
UPDATE 2-Taiwan Q2 GDP returns to on-year growth but risks cloud rest of 2016
July 29, 2016 / 12:56 AM / a year ago

UPDATE 2-Taiwan Q2 GDP returns to on-year growth but risks cloud rest of 2016

(Adds comments, details)

* First on-year growth after three quarters of contraction

* Global uncertainties remain in 2016

* Central bank expected to cut rate again in Sept

By Faith Hung and Roger Tung

TAIPEI, July 29 (Reuters) - Taiwan’s trade-reliant economy returned to on-year growth in the second quarter for the first time in a year as the slide in exports slowed, but global economic headwinds will keep pressure on the central bank to cut rates in the second half.

The economy grew 0.69 percent year on year in the second quarter, official data showed on Friday, better than the 0.56 percent growth forecast in a Reuters poll. It also follows three consecutive quarters of on-year contraction in gross domestic product.

The growth, however, is unlikely to change the government’s meagre full-year GDP estimate of 1.06 percent with weak global demand maintaining pressure on the island’s central bank to trim interest rates again.

“Although global economic growth is slow...the semiconductor industry is gaining momentum,” the Directorate General of Budget, Accounting and Statistics said in a statement.

The economy grew a mere 0.15 percent in seasonally adjusted annualised terms from the previous quarter and a 0.04 percent seasonally adjusted quarterly rate.

However, Sophie Wang, an official at the statistics agency, told a news briefing global uncertainties from Brexit and the threat of terrorism cloud the outlook for the rest of the year.

The expected launch of Apple Inc’s new iPhone model later this year and typically stronger demand ahead of the Christmas shopping season are unlikely to provide much support for Taiwan’s exports in the second half of this year, some analysts said.

Taiwan is a major Asian production house for global tech names such as Apple, making components for smartphones, notebook PCs and other gadgets.

Taiwan’s export orders, a gauge of global technology demand, contracted for the 15th straight month in June, though at a slower-than-expected pace while exports fell for the 17th month in a row.

“Weak growth in Taiwan’s main trading partners is likely to continue to drag on export demand,” Gareth Leather and Krystal Tan, economists at Capital Economics, said in a research note.

“China’s move up the value chain, which has led to Chinese companies producing more of the high-value semi-conductors and other intermediate goods that were previously imported from Taiwan, will remain a drag.”

Taiwan’s central bank is widely expected to cut interest rates again in its September quarterly meeting following four straight rate cuts since last September.

“Taiwan will continue cutting rates because global central banks will not stop loosening monetary policy right away,” said Forest Chen, an economist at a unit of Yuanta Financial Holdings .

Taiwan slashed its 2016 GDP outlook for the third time in May to 1.06 percent, slower than the 1.47 percent growth it had previously forecast.

The 2016 export estimate was revised to a 3.65 percent contraction, deeper than the 2.78 percent fall predicted earlier. (Additional reporting by Loh Liang-sa and Emily Chan; Editing by Sam Holmes)

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below