Taiwan Tech Exports Fuel 2018 Momentum

Taiwan nudged up its 2018 economic growth forecast on Tuesday, as strong exports continue to drive economic momentum, while consumption and private investment gradually improve.

The trade-reliant economy has reaped the rewards of recovering growth in its key markets as well as from strong demand for semiconductors and other electronics. Taiwan’s factories play a major role in the global technology supply chain, Reuters reported.

Full-year 2018 growth was raised to 2.42% from 2.29% forecast in November. Fourth-quarter gross domestic product in 2017 was kept at 3.28%, the same as preliminary figures, putting full-year 2017 GDP at 2.86% compared with 2.84% earlier as there were revisions in the previous quarters. Fourth-quarter growth was the fastest since the first quarter of 2015.

“As the global economic recovery gained strength, the semi-conductor market was vibrant and demand for machineries heated up,” the directorate general of budget, accounting and statistics said in a statement, adding that exports in chip, electronics components, machineries, metals and plastics products all recorded double-digit growth in the fourth-quarter.

The government also nudged up its inflation outlook for 2018 to 1.21% from 0.96% projected in November.

Exports were a strong spot in the economy last year, with factories rushing to meet orders for Apple Inc’s highly-anticipated iPhone X that went on sale in the fourth quarter, and other new smartphones and tech products.

Analysts have suggested that economic momentum generated by global tech demand would extend into the first half of 2018, but are uncertain if slow sales of Apple’s iPhone X, a strong Taiwan dollar and rising trade protectionism would hurt the island’s prospects later in the year. So far, stronger-than-expected export orders and manufacturing activity, along with subdued inflation, have given the authorities room to keep policy unchanged.

“We expect consumption and investments linked to domestic demand will be better this year,” said Lexie Lin, analyst at Sinopac Securities. “Exports in 2018 won’t be too outstanding, because Q4 was too good, unless there’s a big breakthrough in iPhone sales this year to pull up the demand.”

Lin expects GDP to grow 2.6% this year and says the government may upwardly revise the full-year inflation rate, although that will not affect interest rates.

Taiwan’s central bank kept its discount rate steady at 1.375% for the sixth consecutive quarterly meeting in December. Its next policy review is on March 22.