Cyclical rebound tipped for Taiwan in Q3 as electronics strengthen

September 26, 2017

TAIPEI – Taiwan’s GDP is likely to see a cyclical rebound in the third quarter of 2017, according to an Economic Update by ANZ Bank.  It says the economy continues to recover steadily, chiefly benefitting vibrant activity in global electronic supply chains.

“Taiwan’s GDP rose 2.13% y/y or 0.47% saar in Q2, lower than Q1’s 2.66% y/y and 3.47% saar,” ANZ says. “However, we see a noticeable pattern of softening growth in Q2 in previous years.


“Given decent export figures, an improvement in Q3 GDP is expected. We maintain our current GDP forecast of 2.2% for 2017 and 2.3% for 2018.”


ANZ says Taiwan’s economic momentum continues to pick up, riding on its vibrant electronic supply chains and a broad recovery in major markets.


“Exports are expected to stay solid in Q4, thanks to improved global growth and the launch of the new iPhone models (but) risks remain from an anti-trade stance from the US, as well as geopolitical tensions in the region.”


ANZ says Taiwan’s CPI remains stubbornly low, with a strong domestic currency suppressing import prices. August’s CPI rose by 0.96% y/y, with the CPI rising by an average of just 0.5% since February 2017.


“With growth picking up only gradually, inflation is expected to remain benign in Q4 2017,” it says. “In the absence of a strong labour market recovery, wage growth is also unlikely to provide much impetus.


“We currently forecast inflation to remain around 0.5% y/y till end-2017.”


Taiwan’s large current account surplus, which has been sustained at around 13% of GDP, continues to provide fundamental support to the TWD, ANZ says.


“With the external outlook improving and the global tech sector holding up, the current account backdrop will remain supportive for the TWD.  


“Foreign exchange reserves hit a record US$446 billion in August, as authorities continue to smoothen the TWD’s appreciation pressure. Portfolio inflows were strong in H1, but have been experiencing equity outflows since late July.


“With the US Federal Reserve embarking on balance sheet reduction and another rate hike in December being likely with further cuts next year, the rebound in the USD should see USD/TWD moving higher. (ATI).