By Faith Hung
TAIPEI, April 30 (Reuters) - Taiwan's economy grew by a
much-slower-than-expected 1.54 percent in the first quarter from
a year earlier, badly undershooting a median forecast of 3
percent as export growth fell short of expectations and private
The figure was well below even the lowest forecast from 11
analysts polled by Reuters, as soft global demand continues to
weigh on Asia's trade-reliant economies.
On a quarterly basis, gross domestic product (GDP)
contracted 0.8 percent from the December quarter, preliminary
data showed on Tuesday.
Private consumption growth eased to 0.35 percent on-year,
from 1.55 in the fourth quarter, contributing 0.20 percentage
point to GDP growth, while government spending declined 0.52
But investment remained robust, growing 10.64 percent from
8.97 percent the previous quarter, contributing 1.65 percentage
Exports increased 4.84 percent, while imports rose strongly
at 6.92 percent, with net exports dragging growth by 0.26
percentage points. (Imports are subtracted from exports to give
the net effect.)
Reduced government spending cut GDP growth by 0.5 percentage
points to 1.54 percent.
As demand for Taiwan's exports is expected to pick up
following the typically slow first quarter, some analysts saw
the weak GDP number as signifying the worst was over for the
export-driven economy, sparking a rally in Taiwan stocks
and the local currency.
Taiwan shares ended up 0.8 percent to a
more-than-13-month closing high on Tuesday, while the Taiwan
dollar rose T$0.128 to T$29.478 to the U.S. dollar in early
'Most investors believe GDP has hit the bottom in Q1, and
will be then ticking up each quarter throughout this year,' said
Rex Chen, chief investment officer of BNP Paribas's fund
management joint venture in Taiwan.
Frances Cheung, a senior strategist of Credit Agricole CIB
in Hong Kong, said that although exports had contributed
slightly to GDP growth, expanded imports had been more
significant in reducing it.
'On a more positive note, contributions from exports
actually picked up, but imports were even stronger. So it may be
a good sign for Q2 growth if those imports are transformed into
exports going forward,' said Cheung.
Andrew Tsai, an economist at KGI Securities, took a slightly
less optimistic view and noted the lack of policy options
available to stimulate growth because an interest rate cut by
the central bank would not stimulate demand.
'We may not see a strong rebound until Q3-Q4,' he said,
adding that the central bank may try to lower the Taiwan
dollar's value via heavy selling of the local currency to keep
exports competitive against those of South Korea and other Asian
Tuesday's share and currency market rallies took place
against a backdrop of weak demand from Europe and China,
Taiwan's biggest export destination, suggesting the market
reaction may have been premature.
Mainland China's economic recovery unexpectedly stumbled in
the first quarter as the annual rate of growth eased back to 7.7
percent from the 7.9 percent pace set in the final quarter of
Overlapping that data, Taiwan's export orders unexpectedly
contracted 6.6 percent in March from a year earlier, shrinking
for the second straight month..
Taiwan's export orders are a leading indicator of demand for
Asia's exports and for hi-tech gadgets such as smartphones, and
typically lead actual exports by two to three months.
(Additional reporting by Clare Jim; Editing by Eric Meijer)
Keywords: TAIWAN ECONOMY/GDP
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