GDP growth to slow to 2.1 percent due to electronics downturn, ANZ predicts

By Crystal Hsu  /  Staff reporter

Thu, Mar 21, 2019 - Page 12

Taiwan’s economy might grow 2.1 percent this year as a downturn in consumer electronics would weigh on exports, but falling imports due to lower commodity prices would help sustain net external demand, Australia and New Zealand Banking Group Ltd (ANZ) said.

Domestic demand might be lackluster, as economic uncertainty would drag on household and corporate sentiment, the banking group said.

“We expect growth momentum to stay soft, with GDP growth at 2.1 percent for this year,” lower than the government’s forecast of 2.27 percent, as Taiwan’s export-reliant economy continues to face headwinds amid a US-China trade dispute, ANZ said.

Growth fell to 1.8 percent in the final quarter of last year, with net external demand dragging on the economy by 1.4 percentage points, even though government consumption provided some support, it said.

As the electronics and the information and communications technology sectors account for more than two-thirds of the nation’s exports, corrections in the global electronics cycle pose headwinds to Taiwan’s economic outlook, ANZ said, adding that machinery and electrical equipment exports also contracted 1.7 percent in December last year, slowing export growth to 0.2 percent from a year earlier.

As Asian economies play an important role in global technology supply value chains, the downturn has affected their trade and growth outlooks, it said.

Smartphone shipments peaked at 1.5 billion in 2016 and have since declined over the past two years, ANZ said, adding that the trend mirrored a plunge in the electronics exports of Taiwan, South Korea, Vietnam and China.

Key global smartphone players — Apple Inc and Samsung Electronics Co — have substantial impact on the trade cycles of Asian economies, it said.

As US tech giant Apple typically introduces next-generation devices in September to November, Taiwan’s exports witness an uptick in the quarter preceding the releases, it added.

The domestic market is strongly related to export performance, ANZ said, adding that the global electronics downturn would have material bearings on the nation’s financial sector.

Domestic consumption would remain lackluster, while muted inflation would continue to hinder wage growth, it said.

Growth in consumer prices last year moderated to 1.3 percent and might ease further to a 0.8 percent pickup this year, it said, adding that softness in inflation measures would give the central bank room to extend its accommodative monetary policy stance.

“We expect the rediscount rate to hold steady at 1.375 percent through the year, barring a hawkish tone by the US Federal Reserve or a sharp jump in inflation,” ANZ said.

The central bank is scheduled to review policy rates at a quarterly board meeting today.