Taiwan Q3 economic growth likely to rise following recovery in electronics, exports sector

Economic growth in Taiwan is expected to have risen during the third quarter of this year, following a recovery in the country’s electronics and exports sector. Exports made a turnaround last quarter, thanks to the cyclical recovery in the electronics sector as a result of the new iPhone launch.

The Q3 GDP is rescheduled to be released tomorrow. Growth is expected to rise notably to 2.0 percent y/y, up from 0.7 percent in Q2. In the sequential terms, growth is estimated to pick up to 3.6 percent q/q on a seasonally adjusted annual rate (saar) basis, from 0.2 percent, DBS reported.

The recent safety crisis at Samsung may have also indirectly benefited Apple’s Taiwanese suppliers. In the real terms, exports increased 3.4 percent y/y in Q3, compared to 0.8 percent in Q2. Industrial production and manufacturing PMI also showed marked improvements in 3Q.

However, domestic demand remained on a soft track. Retail sales registered a poor 0.9 percent growth in Q3, in light of slightly higher unemployment, stagnant wage growth and lackluster consumer confidence. Subdued domestic demand, coupled with the slowdown in inbound tourism, should curb the performance of the services sector.

"If the Q3 GDP matches 2 percent, full-year growth will likely exceed 1.0 percent to reach 1.1-1.3 percent, better than our current estimate of 0.9 percent. But the upside risks to next year’s growth forecast at 1.8 percent will be relatively limited. The electronics-driven recovery is expected to lose steam in H1 2017 as the Apple effect will eventually dissipate," DBS commented in its latest research note.