Taiwan's Economy Surges in Q2 2024, Driven by AI Boom and Export Growth

Taiwan's government statistics office puts Q2 growth at 5.09% | Taiwan News | Aug. 1, 2024 10:28

TAIPEI (Taiwan News) -- Taiwan's official statistics agency announced that Q2 year-on-year GDP growth came in at 5.09%, slightly lower than previously forecasted 5.18%, due to weak exports. The government agency warned that if economic growth remained unchanged in the second half of the year, the full-year economic growth estimate would drop slightly to 3.91%. However, the Directorate General of Budget, Accounting, and Statistics (DGBAS) said the pace of corporate investment has recently accelerated and the domestic economy remains stable and exhibiting an upward trend, per CNA. Although Taiwan's economic performance has not been as good as expected in Q2, it still ranks in first place with 5.09% growth when compared to the four Asian Tiger economies: Hong Kong (3.3%), Singapore (2.9%), and South Korea (2.3%). The DGBAS said export goods decreased by US$4.7 billion (NT$1.5 trillion) compared to the forecast value, which was the main drag on growth. The exports in the second quarter grew by 7.87%, which was 3.35% lower than the forecast value. "AI-driven exports were not as good as forecasted in May," said DGBAS official Wang Tsui-hua (王翠華). He said business opportunities for AI exist, but predicting the timing of AI-backed demand has been difficult. This comment echoes previous DGBAS remarks about the uncertainty of AI-related information technology, mass production, and application processes. Wang said that TSMC raised its planned capital expenditure from US$30 billion to US$32 billion in July. Also, ASE has revised its capital expenditures upward again because of its optimism about advanced packaging and testing production capacity. As for private consumption, thanks to a stable job market, salary increases, and a high stock market, DGBAS said private consumption grew 2.71% in real terms in the second quarter, a 0.12 % increase above the forecast. Wang concluded that Taiwan's economy is still stable and exhibiting an upward trend. The latest economic indicator for June, announced by the National Development Council on Monday (July 29), showed a "red light" indicator representing optimism as the economy is expected to enjoy stable growth.

Taiwan Q2 preliminary GDP expands 5.09% y/y

TAIPEI, July 31 (Reuters) - Taiwan's trade-dependent economy grew more than expected in the second quarter of 2024, thanks to stronger demand for new applications such as artificial intelligence (AI)-related products. Taiwan is a key hub in the global technology supply chain for companies such as Apple and Nvidia, and home to the world's largest contract chipmaker, Taiwan Semiconductor Manufacturing Co Ltd (TSMC) . Gross domestic product grew by a preliminary 5.09% in the April-June period from a year earlier, the statistics agency said on Wednesday, beating the 4.8% growth forecast by analysts in a Reuters poll, but slower than the 6.56% expansion in the first quarter. Quarter-on-quarter, the economy grew at a seasonally adjusted annualised rate of 0.13%. Shipments from the technology sector, boosted by global demand for AI-related products, will likely help the economic momentum. Second-quarter exports rose 9.9% versus the same period in 2023, compared with the first quarter's annual expansion of 12.9%. The economy in China, Taiwan's largest export market, grew much more slowly than expected in the second-quarter, expanding 4.7%, its slowest since the first quarter of 2023 and missing a 5.1% analyst forecast in a Reuters poll. (Reporting by Faith Hung and Jeanny Kao; Editing by Andrew Heavens)

Taiwan's Economy Slows But Maintains Strong Momentum as Exports Grow -- Update

Taiwan's economy cooled in the second quarter, but kept up a robust pace of growth as the island keeps reaping the benefits of strong demand for its tech exports amid the artificial intelligence boom. Gross domestic product expanded 5.1% in the April-June quarter from a year earlier, advance estimates showed on Wednesday. That compared with the 6.56% expansion seen in the first three months of the year and expectations for 4.8% growth taken from a Wall Street Journal poll. Growth was driven by exports of goods and services, which surged 7.9% year-on-year thanks to demand for emerging technologies such as AI, the statistics department said. Imports also grew 11%, it added. Analysts had expected the second-quarter print to show a slowdown from the first quarter's unexpectedly strong reading, which was flattered by a low base a year earlier, but continue showing robust momentum amid continued strength in exports and industrial production. Taiwan in May had said it expects its economic growth rate to roughly triple this year, projecting an expansion of 3.94% versus 1.28% for 2023. Economists think growth will pick up in the second half of the year, in large part due to the strength of AI-related exports, which offer a cushion against weakness in other parts of the economy. The island is home to the world's largest contract chip maker, TSMC, and accounts for the bulk of global advanced semiconductor manufacturing capacity. That puts its economy as one of the top beneficiaries of the revival in global demand for electronics. Given Taiwan's run of stronger-than-expected data over the past months, "an upgrade of the full-year GDP forecast is in order," ING economist Lynn Song said in a note. ING now projects growth of 4.6% this year, up from the 3.8% seen previously. Capital Economics also sees faster growth ahead. Though private consumption is likely to weaken more as soft real wage growth weighs on household incomes, exports of AI-related products will counter that, which in turn should translate to an increase in investment, senior economist Gareth Leather said. Capital Economics cuts its Taiwan growth forecast for this year to 4.5% from 5.5%, but that still leaves it well above consensus views for 3.7%. On a seasonally adjusted basis, Taiwan's economy expanded 0.03% in April-June from the previous quarter, Wednesday's data showed. That compared with 0.27% in the first quarter. Final second-quarter GDP data is due to be released Aug. 16.

Taiwan Continued To Grow Strongly In Q2 2024 On Demand From AI Boom

Gross capital formation was the main factor behind the beat in the 2Q24 GDP. Taiwan's GDP growth slowed from 6.56% YoY in 1Q24 to 5.09% YoY in 2Q24, beating already upgraded forecasts and moderating by less than anticipated. Rather than the slight sequential decline expected by markets, there was a small 0.03% seasonally adjusted quarter-on-quarter increase in the second quarter. The AI boom continued to be the main driver of growth in Taiwan, given its leading position in the semiconductor industry. AI-related demand contributed to both exports as well as gross capital formation in the second quarter. Gross capital formation was the main factor behind the beat in the 2Q24 GDP, bouncing back strongly after four consecutive quarters of negative YoY growth. While this was in part due to a supportive base effect and change in inventories, this was also driven by increased investments in machinery equipment, construction and intellectual property products. In combination, gross capital formation grew 15.3% YoY and contributed 3.9ppt to second-quarter growth. Exports continued to see a solid 7.9% YoY growth rate in 2Q24, but this was overshadowed by the 10.6% YoY growth in imports. In sum, net exports actually dragged down growth in the second quarter, detracting 0.4ppt from growth, the first negative contribution since 2Q23. Consumption was mostly in line with expectations, growing at a relatively more tepid 2.7% YoY in 2Q24, contributing 1.3ppt to growth on the quarter. Consumption has been supported by a positive wealth effect amid strong property and equity markets so far this year. Taiwan's second quarter growth maintained sequential growth and saw a smaller-than-expected moderation in YoY terms Taiwan's data has come in stronger than expected for the last several months, and after the beat of the second quarter GDP and continued recovery of the leading index, we believe an upgrade of the full-year GDP forecast is in order. As such, we upgrade our 2024 GDP forecast from 3.8% YoY to 4.6% YoY. Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more