The latest GDP data released by the Directorate-General of Budget, Accounting and Statistics (DGBAS) on Friday showed that the nation’s economy remained robust in the first quarter of this year.
According to the DGBAS estimates, the economy started out this year on a solid footing, with GDP in the January-to-March quarter growing 3.04 percent year-on-year, exceeding a previous forecast of 2.77 percent made in February and marking the third straight quarter that the economy expanded more than 3 percent from a year earlier. The growth was driven mainly by a 6.27 percent gain in government consumption, a 6.03 percent rise in exports and a 3.02 percent increase in private consumption.
However, gross capital formation decreased 1.7 percent in the first quarter from a year earlier, which was lower than the 2.15 percent gain the DGBAS forecast in February. It has declined for three quarters in a row.
The poor showing indicates that private investment was weaker than expected last quarter, which the agency attributed to a decrease in machinery and equipment investment as well as a decrease in inventory, mainly by semiconductor companies.
A closer look at the DGBAS statistics shows that the economy lost steam last quarter in seasonally adjusted terms. On a seasonally adjusted annualized rate basis, the GDP grew just 1.32 percent last quarter, down from 4.34 percent and 5.65 percent growth in the prior two quarters, raising questions about whether the growth momentum can be sustained for much longer.
Leading indicators released by the National Development Council on Friday added to worries about the stability and continuity of economic growth. The trend-adjusted leading indicator index, which is aimed at forecasting the economic landscape six months ahead, decreased 0.17 percent last month from February and posted a decline for the fourth straight month.
While a total decline of 0.45 percent in the leading indicator index since December is not sharp and might not indicate any significant downturn on the economic front, the strength of the expansion phase of the nation’s 15th business cycle looks feeble, even though the economy has yet to reach its peak.
Still, the first-quarter GDP figures showed that Taiwan remained one of the slowest-growing economies in Asia, compared with South Korea’s 2.8 percent growth, Singapore’s 4.3 percent and China’s 6.8 percent.
Moreover, Taiwan is set to lag further behind its Asian Tiger peers in terms of growth in GDP per capita, Bloomberg News reported last week.
Based on IMF data, Taiwan’s GDP per capita is forecast to increase by 86 percent from 2000 to 2023, compared with 148 percent growth for Hong Kong, 211 percent for Singapore and 242 percent for South Korea.
By comparing Taiwan and South Korea, which have similar industrial structures, Bloomberg said Taiwan’s GDP per capita could reach US$25,977 this year, 26 percent less than South Korea’s US$32,775, but the disparity would widen to 47 percent in 2023, when Taiwan’s GDP per capita is predicted to increase to US$27,715, while South Korea’s might hit US$40,867.
The Bloomberg report attributed Taiwan’s long-term weakness to the country’s inability to develop global brands. A number of Taiwanese companies are moving up the global corporate ladder in pursuit of building their brand, but not all efforts have proven successful.
However, the key to Taiwan’s economic strength is for it to develop national strategies that consider not just solutions to short-term economic challenges, but also ways to transform the industrial structure and comply with changes in the global economy.
While domestic and global economy prospects remain favorable this year, challenges are always on the horizon, as there are concerns over an escalating trade war between the US and China and effects stemming from other geopolitical tensions underlining the heightened uncertainty over the global financial markets and the implications for the nation’s export-driven economy.
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