Taiwan GDP growth hits 2.43% in 2022, shy of forecast

Jan 24, 2023

Taiwan saw year-over-year gross domestic product (GDP) growth of 2.43 percent in 2022, dipping below the forecast 3.06 percent amid weak fourth-quarter global demand, the Directorate General of Budget, Accounting and Statistics (DGBAS) said Wednesday.

In the fourth quarter of 2022, Taiwan's exports-oriented GDP contracted 0.86 percent  from a year earlier, marking the first contraction since the first quarter of 2016, when the country's economy shrank 0.09 percent, according to an advanced estimate report released by the DGBAS.

The fourth-quarter GDP figure came under the DGBAS's November forecast of a 1.52 percent increase.

The GDP growth in 2022 was the slowest since 2016, when Taiwan's economy grew 2.17 percent, and well below an earlier government forecast of 3.06 percent.

During the October-December period, fast-growing inflation worldwide and aggressive rate hike cycles by the major central banks in the world hurt global demand and led to inventory adjustments in many industries, according to DGBAS specialist Wu Pei-hsuan.

Wu added that an outbreak of COVID-19 in China also hurt consumption and interrupted production activities.

According to Wu, Taiwan's exports to China fell 15.6 percent from a year earlier in the fourth quarter, while the country's outbound sales to the Association of Southeast Asian Nations (ASEAN) bloc, the United States, and Europe also dropped 1.7 percent, 3.8 percent, and 9.3 percent, respectively.

As a result, Taiwan's exports of merchandise and services fell 5.09 percent from a year earlier in the fourth quarter, down 5.14 percentage points from an earlier estimate, the DGBAS said.

The DGBAS added that Taiwan's imports were affected by slowing global demand, which prompted many exporters to turn cautious about expansion.

In addition, raw material prices moved lower, adding downward pressure on the country's import value, the DGBAS said.

In the fourth quarter, Taiwan's imports of merchandise and services fell 1.61 percent from a year earlier, down 2.25 percentage points from the previous estimate, the DGBAS figure showed.

During the three-month period, net foreign demand contributed minus 2.59 percentage points to Taiwan's overall GDP growth, the DGBAS said.

Capital formation in the fourth quarter remained resilient, growing 0.03 percent from the same period of a year earlier, according to the DGBAS, which attributed the rise to an increase in machinery and production-equipment investments.

However, the DGBAS noted that this growth was offset by a decline in purchases of airplanes and ships in the fourth quarter.

The capital formation growth in the fourth quarter represented a 0.89 percentage point fall from the DGBAS's earlier estimate.

In the wake of eased COVID-19 restrictions, private consumption increased 2.89 percent from a year earlier in the fourth quarter, an 0.24 percentage point increase from the DGBAS's earlier forecast at a time when people became more willing to spend and travel.

The DGBAS said private consumption contributed 1.29 percentage points to Taiwan's GDP growth in the fourth quarter, while domestic demand as a whole grew 2.04 percent, contributing 1.73 percentage points to the economic growth.

Looking forward to 2023, Wu cited information collected by the Ministry of Economic Affairs as saying that manufacturers have been keen to adjust their supplies, a move expected to send inventory levels lower.

However, it still needs more time to observe whether inventory levels will return to normal in the first quarter or in the second quarter, Wu added.

Wu said she remains upbeat about Taiwan's exports, in particular in the second half of this year, after inventory adjustments for 2022 in the U.S. and European markets.

 

Source: Focus Taiwan