Taiwan sees GDP slowing to 5-year low as pandemic hurts consumption

Workers assemble electronic components at Taiwanese technology giant Foxconn’s factory in Shenzhen, China. (AFP pic)

TAIPEI: Taiwan’s economic growth is likely to slow to its weakest in five years in 2020 as the coronavirus pandemic hurts domestic consumption and the job market, though strong global demand for electronics could cushion the blow for the trade-reliant island.

Taiwan’s economy, a key part of the global technology supply chain, is likely to grow 1.67% this year, the Directorate General of Budget, Accounting and Statistics said on Thursday, again downgrading its outlook.

In February it forecasted full-year growth at 2.37%, but in April the agency’s chief told parliament it was more likely to be 1.3%-1.8%.

Gross domestic product (GDP) rose by a revised 1.59% in the first quarter from a year earlier, slightly up on the preliminary 1.54%, the agency said.

The statistics agency said the pandemic has hit the island’s consumption, especially the services sector and tourism, but still-strong global demand for electronics helped offset some of the impact, thanks to the growing need for telecommuting as more people work from home to reduce the risk of infections.

Chu Tzer-Ming, head of the statistics agency, said the pandemic has knocked 2.1 percentage points off Taiwan’s growth so far this year, but the island will “have no problem” keeping its GDP above a growth rate of 1%.

Taiwan’s export orders unexpectedly grew for a second consecutive month in April, fuelled by “explosive” demand for products such as laptops and microchips.

The agency said the pandemic remains a major uncertainty for Taiwan’s growth, although it expects most countries to relax virus-related curbs in the summer and autumn.

While Taiwan has not gone into total lockdown to contain the virus due to relatively successful measures that prevented its rapid spread, the government has repeatedly warned of uncertainty for the economy and is rolling out a stimulus package worth T$1.05 trillion.

Unemployment hit a more than six-year high in April.

In addition to the virus uncertainty, analysts said renewed US-China tensions could spell extra trouble for Taiwan’s electronics exports, a bellwether of demand for global tech giants such as Apple.

The statistics agency forecast exports would “maintain positive growth” in 2020, compared with a 1.4% decline in 2019.

It also nudged down its inflation estimate for 2020 to -0.32% from 0.62%.