Taiwan’s Economic Outlook – November 2016

Third Quarter Brings Improved Results

As discussed in this issue’s cover story, the Taiwan economy rebounded in the third quarter, registering a growth rate of 2.06% from the same period last year according to preliminary calculations. The improvement was attributed mainly to stronger exports of electronics products, particularly components related to the Apple iPhone 7.

The strength in electronics exports also stimulated a jump in gross capital formation, which rose in the third quarter by 3.2% year on year – the first positive number after four quarters of negative growth. Ines Lam, an economist who covers Hong Kong and Taiwan for institutional brokerage and investment firm CLSA, says that “exporting companies are seeing greater demands for their products, so they start investing more, which is a pretty good sign.”

Private consumption in Q3 also rose by 2.4% in annual comparisons, up from 1.2% in Q2. Lam notes that stable employment figures are “sending a positive message to consumers,” resulting in rising household spending and increased consumer confidence. The index maintained by National Central University’s Research Center for Taiwan Economic Development confirms the upward trend in consumer confidence. Unemployment declined from 4.02% in August to 3.99% in September, according to the Directorate General of Budget, Accounting and Statistics (DGBAS). The consumer price index in September was 0.33% higher than a year earlier, a decline from the 0.57% in August.

Data Source: TWSE Unit: NT$ Billion
Data Source: TWSE Unit: NT$ Billion

While electronics exports have recovered, Lam warns that momentum might not be sustained. “In the next two or three months, exports will still be quite strong, but after that I’m worried that exports will decline again, as the boost from Apple products will fade,” she says. She notes that commodity prices, particularly for crude oil, have had a big impact on Taiwan’s chemicals and plastics industries, which have seen a decline in export value by more than 9% so far this year.  “Until we see a substantial rebound in commodity prices, these products will still remain quite soft,” Lam says.

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