Preliminary data disappoints amid sluggish demand for tech exports
Taiwan has opened up after COVID-19, but it faces weak external demand for its tech exports. © EPA/Jiji
THOMPSON CHAU, Contributing writerApril 28, 2023 17:36 JSTUpdated on April 28, 2023 18:04 JST
TAIPEI — Taiwan’s export-dependent economy slipped into a recession in the first quarter of 2023, according to preliminary figures released by the Directorate General of Budget, Accounting and Statistics on Friday.
Gross domestic product likely contracted by 3.02% in the January-March period versus a year earlier, the office said. The GDP had declined 0.41% year-on-year in the fourth quarter of last year.
The figures show that even though Taiwan has reopened for international travel and business after the COVID-19 pandemic, it continues to be weighed down by sluggish demand for technology products amid global economic woes. The preliminary result for the first quarter was worse than the initial forecast of a 1.20% contraction, as well as the 1.25% drop predicted in a Reuters poll of economists.
The statistics office said that exports are heavily affected by the pressure of global inflation and interest rate hikes, weak demand and the impact of inventory adjustments across the supply chain. Overall, Taiwan’s exports of goods and services contracted by 10.86%.
The government previously said it expects full-year growth of 2.12% for 2023. That would be the slowest pace in nearly eight years and lower than the 2.45% growth for 2022.
Taiwan has removed all border restrictions imposed on foreign travelers during the pandemic. This month, it also lifted a requirement to wear a face mask in public transport.
In a bright spot, private consumption grew by 6.60% in the first quarter. “With the weakening of the pandemic, traveling, shopping and dining have returned significantly,” the office said. “In the first quarter, the turnover of the retail industry and the catering industry increased by 5.28% and 17.18%, respectively, compared with the same quarter of the previous year.”
But consumption and travel may not be sufficient to offset the weak exports.
Taiwan is a critical hub in the international technology supply chain for multinationals such as Apple, and home to the world’s biggest contract chipmaker, Taiwan Semiconductor Manufacturing Co. (TSMC).
“Weak external demand remains the biggest challenge for Taiwan, with China’s reopening having failed to lift demand for Taiwanese goods like chips and other critical intermediate components,” said Nick Marro, an analyst with the Economist Intelligence Unit.
High levels of customer inventory in the U.S. and Europe are also affecting Taiwan’s exports, he said.
“The most optimistic forecasts aren’t expecting a rebound in Taiwanese export activity until the second half of 2023, but even that could be an optimistic timeline,” he told Nikkei Asia.