The latest economic data released on Thursday by the Directorate-General of Budget, Accounting and Statistics (DGBAS) showed that the nation’s economy remained robust in the third quarter of this year. GDP growth in the July-to-September quarter was above the market’s and the DGBAS’ expectations at 3.97 percent year-on-year. While that was the slowest growth in the past four quarters, it was higher than the 3.17 percent average for the same period over the past 10 years, indicating steady growth momentum.
The DGBAS said the growth rate on a seasonally adjusted quarterly basis was 1.08 percent in the third quarter, the highest in the past three quarters. On a seasonally adjusted annualized basis, it was 4.38 percent, also the largest so far this year, suggesting that growth momentum had increased significantly last quarter.
The main growth driver in the last quarter was gross capital formation, which increased at a double-digit percentage pace for the second consecutive quarter, rising 15.27 percent year-on-year. That was boosted by continuing strong investments by the semiconductor industry and its role in the supply chain of artificial intelligence (AI) products, as well as the effects of a low comparison base and likely inventory rebuilding.
Two other major GDP components — government and private consumption — also continued to support the economy, rising 3.9 percent and 1.92 percent year-on-year respectively. The growth in government consumption accelerated for the fourth consecutive quarter, while private consumption expanded for the 12th quarter in a row. However, its 1.92 percent rise was the weakest since the first quarter of 2022 and was lower than the average growth of 2.55 percent for the same period over the past 10 years, implying that it has lost steam.
Moreover, net exports (exports minus imports) — another major GDP component — proved to be a drag on the economy for the second consecutive quarter, contracting 1.16 percent from a year earlier and deteriorating from a 0.29 percent drop the previous quarter. That stemmed from a larger expansion in Taiwan’s imports, up 13.33 percent year-on-year, even as exports rose 8.67 percent from a year earlier, thanks to the AI boom and sustained demand for information and communications technology products.
Overall, Taiwan’s economy grew 5.18 percent year-on-year in the first three quarters of this year and might be on track to expand 4.1 percent for the whole year, the highest in the past three years, despite headwinds from the moderation in private consumption growth and negative net exports, the DGBAS projected.
The index of leading indicators released by the National Development Council on Monday last week also added to optimism about the stability and continuity of economic growth. The trend-adjusted leading indicators index, aimed at forecasting the economic landscape six months ahead, increased 0.07 percent last month from September, rising for the 11th consecutive month. That implies the economy would continue to heat up in the coming months as central banks in Europe and the US maintain an interest rate cut cycle, while China further eases monetary and fiscal policies, which would help boost the recovery of end-market demand and bolster Taiwan’s export-reliant economy.
Of course, the international macroeconomic situation is changing rapidly and challenges are always on the horizon, amid concerns over an escalating rivalry between the US and China, the outcome of today’s US presidential election and persistent geopolitical tensions. All of these are likely to underline the heightened uncertainty over global financial markets and the implications for Taiwan’s exports and investment prospects.
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