Taiwan Q1 GDP likely to register 2.5 pct y/y on improvement in trade flows, says DBS Bank

Taiwan’s first quarter gross domestic product (GDP), due to be released on April 28 is expected to register 2.5 percent y/y, down from the peak of 2.9 percent in Q4 2016 but close to the average levels seen in H2 2016. In the q/q (saar) terms, growth is projected to rise to 3.2 percent in Q1 from 1.8 percent in the final quarter of 2016. The average q/q growth in the past two quarters is also likely to stand at 2.5 percent, DBS Group Research reported.

Exports should remain the important source of growth, due to the recovery in global economy and improvement in trade flows. But the positive effects may have been diluted, due to the TWD’s strong appreciation versus the USD in Q1 (6 percent y/y). On a TWD basis, exports grew 8.6 percent in the Jan-Mar period, underperforming the 15.1 percent rise in the USD-denominated figures by a wide margin.

On the sectoral front, manufacturing, especially electronics manufacturing, is likely to lead the Q1 growth. The construction sector is not out of the woods yet, despite further stabilization in the property market and the tentative rebound in housing prices.

However, the tourism sector is expected to remain sluggish, amid the decline in the number of Chinese visitors and the deterioration in cross-strait relations. On the other hand, the financial services industry may see some positive signs of improvement, thanks to the rise in stock market and the upticks in banks’ loan growth, the report added.