Taiwan economy slows in Q1 on weak exports

Headquarters of HTC Corp. - Taiwan's biggest smartphone maker

Headquarters of HTC Corp. - Taiwan's biggest smartphone maker

Taiwan did not surprise when it released its data on the economy, showing that GDP slowed in the first quarter on a year-on-year basis. But it did surprise when it came to the pace of growth which turned out to be slower than analysts’ estimates. Certainly, Taiwan’s economic growth for the first quarter suffered from the adverse international conditions, including worse-than-expected results noted in China and the United States, and the debt crisis in the European Union, which happen to be its main trading partners. Therefore, the slowdown in the Taiwan’s economy was largely driven by weak exports.

Disappointing Q1 for Taiwan

On the 30th of April, Taiwan’s Directorate General of Budget, Accounting and Statistics released its data on the first quarter, indicating that the country saw its GDP slow down to around 1.54 percent in the period on a year-on-year basis. In addition, quarterly results did not meet analysts’ estimates of 3.1 percent growth for the first quarter. Growth was also significantly lower than the one of 3.7 percent recorded in the three-month period ended December 2012. The officials stressed that the slowdown was mainly driven by weak exports as its main trading partners, including China, the US and the EU, had been struggling.

According to detailed findings, Taiwanese exports, which generate more than 60 percent of country’s GDP, increased roughly 2.4 percent in the three-month period ended March on a year-on-year basis. The results were disappointing, taking into consideration the official estimates of 4 percent export growth. Taiwan’s exports were hit by the weak economic recovery in China and the debt crisis in the European Union. The government underlined that country’s export suffered from the weakening yen as well.  Also in April, HTC Corp., which happens to be the country’s largest smartphone producer, posted depressing results owing to the delay of its much-awaited new product.

Economists are, however, not surprised as they underline that weaker results were absolutely predictable, taking into account the situation in the Taiwan’s main trading partners. Moreover, analysts call attention to the weakening yen which significantly lowered the results of Taiwan-based exporters.

What’s next for Taiwan?

Undeniably, the visible slowdown in Taiwan’s is disturbing, taking into account that China’s and US economies increased in the first quarter less than initially expected. However, the government of Taiwan believes that the China’s economy will witness stronger growth, thereby driving the Taiwan’s economy as well.

Back in February, the Taiwanese government informed that country’s GDP would climb as much as 3.59 percent in 2013, compared to growth of slightly over 1.25 percent recorded in 2012. Taking into account the results for the first quarter, the official estimate is widely expected to be changed in May. Certainly, the ongoing debt crisis in the European Union and patched global economic growth are not acting in Taiwan’s favor, not to mention that country’s exporters have to face fierce competition from Chinese and South Korean manufacturers as well.

Yet estimates of a growth increase in the second half of the year are auspices for Taiwan, thus analysts believe that the country might see its economy increase roughly 3 percent in 2013. Analysts, however, underline that the results will largely depend on the strength of  the economic recovery in China.

Anna Domanska
Anna Domanska is an Industry Leaders Magazine author possessing wide-range of knowledge for Business News. She is an avid reader and writer of Business and CEO Magazines and a rigorous follower of Business Leaders.

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