Private consumption boosts economy

SPENDING UP::GDP expanded 3.04 percent in the first quarter on the back of rising average wages and brisk trading momentum on the stock market, the DGBAS reported

By Amy Su  /  Staff reporter

Thu, May 01, 2014 - Page 13

The nation’s economy grew at its fastest pace in more than a year in the first quarter of the year, driven mainly by better-than-expected expansion in private consumption, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.

GDP expanded 3.04 percent in the first three months compared with a year ago, higher than the 3.02 percent growth forecast made in February by the DGBAS and compared with the 3.0 percent increase predicted by Standard Chartered Bank.

The 3.04-percent growth for last quarter was also the highest year-on-year growth rate since the fourth quarter of 2012, the DGBAS said in its latest report.

The DGBAS attributed the upward revision to stronger-than-expected expansion in private consumption in the first quarter, on the back of rising average wages led by improving profitability of local employers, as well as brisk trading momentum on the stock market.

Private consumption rose 2.94 percent in the first quarter compared with the same period last year, an increase of 0.1 percentage points from the DGBAS’ previous forecast in February.

Strong net exports, which contributed 1.57 percentage points to the overall growth rate, was the other driver for the economy in the first three months, with the output sector showing a 3.72 percent expansion from a year earlier, the report said.

However, the DGBAS maintained its tone that “signs of revival coexist with uncertainty” in the economy.

“The pace of the US’ exit from quantitative easing, China’s economic adjustments, as well as Japan’s recent sales tax increase, are all major risks for the global economy, as well as Taiwan’s economy,” DGBAS senior executive officer Jasmine Mei (梅家瑗) told a press conference.

Domestically, industries have also been facing severe competition from their Chinese peers, which makes structural transformation of local industries more urgent, Mei added.

Mei said the recent controversies over the Fourth Nuclear Power Plant in New Taipei City’s Gongliao District (貢寮) will have a limited impact on the economy in the short term, with no immediate chance of electricity restrictions.

Following the recent dispute over the cross-strait service trade agreement and this week’s antinuclear protests, Hong Kong-based ANZ senior economist Raymond Yeung (楊宇霆) said the heightened political risk is bound to curtail business and consumer confidence, which will likely drag capital expenditure and household spending down in the next two quarters.

The changing domestic growth profile made ANZ adjust downward its GDP forecast for this year to 3.1 percent as opposed to its previous projection of 3.6 percent, despite the seven-in-one elections being held in November, which may offer a short-term boost for domestic spending.

Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered Bank, said he believes the latest GDP statistics support the view that the economy is likely to gain momentum into the second half of this year, as recent data on the technology sector continue to remain upbeat, boding well in terms of capital expenditure and hiring momentum in the manufacturing sector.

The bank maintains its growth forecast for Taiwan's GDP at 3.9 percent for this year.