GDP fell 0.9% YoY in Q4 (Q3: +4.0% YoY). The fourth quarter reading was the weakest since the third quarter of 2009, and confounded market expectations for expansion. The reading raised the expansion for 2022 as a whole to 2.4%, a marked slowdown from 2021’s growth of 6.5%.
Household spending growth fell to 2.9% in the fourth quarter (Q3: +7.0% yoy), amid a much less favorable underlying effect. Meanwhile, public spending rose 3.1% in the fourth quarter (Q3: +2.1% yoy). Gross capital formation stable (Q3: +0.3% YoY).
Exports of goods and services contracted 5.1% in the fourth quarter (Q3: +2.8% y/y), the lowest level in several years. The downturn was due to the disruption related to Covid-19 in China and the decline in global demand for the technology. In addition, imports of goods and services deteriorated, contracting by 1.6% in the fourth quarter (Q3: +2.3% yoy).
On a seasonally adjusted quarterly basis, economic activity contracted 1.1% in the fourth quarter, versus 1.8% growth in the prior period.
The consensus is for the economy to return to growth in the first quarter, although risks are skewed given the much weaker-than-expected fourth-quarter reading and weaker external demand. The speed of the Chinese economy’s recovery from the current wave of Covid-19 cases will be key; China accounts for more than a quarter of Taiwan’s merchandise exports. Strong private consumption and a rebound in tourist arrivals after easing travel restrictions should provide some support to activity in the first quarter.
On the outlook, Ho Woei Chen of United Overseas Bank said:
“The contraction in external demand including semiconductors is likely to continue this quarter, and given Taiwan’s significant exposure, there is now a risk of a technical recession in Q1 2020. However, we are seeing further improvement in private consumption this year and this will continue to It is the main driver of Taiwan’s economy as domestic demand and international travel continue to recover.”
FocusEconomics panel members see GDP growing by 2.2% in 2023, unchanged from last month’s forecast, and by 2.6% in 2024.