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Taiwan’s economy grew at a slower pace of 3.06% in the first quarter of 2022, compared to the previous quarter. However, Taiwan performed better than expected with support from strong tech exports because of global chip demand. A Reuters poll had pegged the gross domestic product (GDP) to grow by 2.9% in January-March 2022 as compared to the last year.
The policy makers have stated that they expect a full-year 2022 growth of around 4%, slower than 6.45% reported in fiscal 2021. Taiwan’s National Development Corporation economists’ have said that the preliminary GDP data for FY 2022 will varied widely from growth of 2.5% to 5%.
“The first quarter exports have been stronger than expected,” said Kevin Wang, economist at Taishin Securities Investment Advisory Co. Wang said that consumer spending has weakened, and due to high inflation, there is a risk that a full year forecast shows a downfall in the economic graph. He added that the U.S. Federal Reserve is combative in terms of fighting inflation, which might have resulted in slowing the pace of economic recovery. This hawkish stance by the U.S. Fed will weaken Asian currencies and the Taiwan dollar. This will put a pressure on inflation resulting in the Taiwan central bank raising interest rates.
Other factors for Taiwan’s growth
“China’s lockdown did not have a major impact on Taiwan’s growth in the first quarter. However, it might have an impact on the second quarter,” said Wu Pei-hsuan, a senior executive officer at Taiwan’s statistical bureau. This is because there are a lot of Taiwanese-owned factories in Jiangsu and Kunshan and many of them have had to reduce production or temporarily shut down.
Also, with a surge in Taiwan’s Covid-19 cases in recent weeks has dampened consumer demand, with domestic consumption staying unchanged at 0.14% in the first quarter despite recovery in global economies.
Moreover, Taiwan is the hub for global technology supply chains – such as for Apple Inc – and has outperformed during the Covid-19 pandemic. With more people preferring to work and study from home, Taiwan has achieved a strong demand for tech exports.
Taiwan’s economy continues to benefit from strong global demand for its high-tech goods and therefore its exports rose 29.4% in 2021. The total first-quarter 2022 exports were up 23.5% from a year earlier in US-dollar terms. Taiwan’s export economy has been the pillar for its quarterly GDP growth and the country continues to see an international demand for tech products which primarily includes semiconductors.
Likewise, China’s economy had grown by 4.8% year-on-year in the first quarter of 2022. However, it slowed sharply in March because of fresh Covid-19 restrictions in Shanghai, while the Ukraine war has disrupted production and weakened trade demand.
