Growth Recovering, But Downside Risks Still Evident
Taiwan's Q412 real GDP growth expanded to 1.5%, on a seasonally-adjusted basis, accelerating from 0.8% in Q312. This has taken full-year 2012 growth to 1.3%, slightly above our projection of 0.9%. Taiwan's languid economic performance last year was largely led by the weakness in the tech sector, which was something we highlighted in the latter stages of 2011 (see our online service 'Crunch Time For High-Tech, Again', November 4, 2011), and which formed the basis for us being ahead, as well as on the bearish side, of consensus throughout 2012 (see chart).
|Weak Growth Forecast Vindicated|
|Taiwan - BMI vs Consensus Real GDP Forecast|
Looking ahead, in line with the cyclical uptick in economic activity that we have witnessed in regional exporters (South Korea, Hong Kong), we harbour similar expectations for the upturn in Taiwan's economy to maintain its course. While we are starting to see supportive pressure from the upcycle in the global tech industry fade, stronger external demand, particularly from China and the US should help to buttress Taiwanese exports. Indeed, indicators such as the HSBC/Markit's purchasing managers' index (PMI), export orders and global semiconductor book-to-bill ratios, all point towards a recovery in economic momentum. That said, our core view sees this momentum lasting through H113, before an expected slowing in China's economy begins to impinge on Taiwanese exporters again. Alongside pertinent indicators such capital goods imports and guidance from the corporate sector, among other concerns which we have highlighted in an earlier piece (see our online service 'Insufficient Evidence Of A Sustained Recovery', January 9), we consequently believe that consensus expectations for 2013 real GDP growth (3.4%) will eventually start to move towards our forecast of 3.0% as the year unfolds.