Taiwan first-quarter GDP slows to four-year low as pandemic hurts exports

(C) Reuters. A woman walks under Taiwan’s landmark building Taipei 101

TAIPEI (Reuters) – Taiwan’s economic growth in the first quarter slowed to its weakest in nearly four years, as fallout from the coronavirus pandemic hurts the electronics exports which are pivotal to its trade-reliant economy.

The government has warned of slowing demand for the island’s export orders in the coming months due to the impact from the virus, and is rolling out an economic stimulus package expected to be eventually worth T$1.05 trillion ($35 billion).

Gross domestic product (GDP) expanded by 1.54% in the January-March period from a year earlier, preliminary data from the statistics agency showed on Thursday, down from 3.31% in the fourth quarter.

Growth in the first quarter was the slowest since a contraction of 0.09% in the first quarter of 2016 and slightly lagged an economists’ forecast of 1.6% in a Reuters poll.

The virus hit consumer spending in the first three months of the year, including the impact from a more than 50% drop in the number of foreign tourists to Taiwan, the agency said.

The effect from the virus and interrupted supply chains was offset by a “significant boost in domestic production” for products including semiconductors and telecommunications, it added.While Taiwan has not gone into total lockdown to contain the spread of the virus thanks to relatively successful measures that prevented a rapid spread of the disease, the government has repeatedly warned of uncertainty for the economy. Earlier this month, it downgraded its growth forecast for this year to between 1.3% and 1.8%, from 2.37% in February.

Some analysts, however, said Taiwan’s success at containing the pandemic will not help avert a recession in 2020, citing a hard hit on the island’s domestic consumption and job market due to a collapse in global demand for its exports, which contributed to more than 60% of its GDP.

Ratings agency Standard & Poor’s on Wednesday projected Taiwan’s economy would contract 1.2% in 2020, before rebounding by 4% in 2021, citing the temporary nature of the impact from the coronavirus pandemic.

“As the outbreak recedes, we expect a strong economic recovery on the back of Taiwan’s dynamic and highly competitive electronics manufacturing sector,” it said.

Still, in a sign of the current slowing demand for Taiwan’s electronic gadgets, the government expects April export orders to fall between 6.3% and 10.3% from a year earlier.

While Taiwan’s job market remained stable in March, the government has rolled out measures to cushion the impact on employment, which includes a T$30,000 wage subsidy for workers whose income was affected and interest-free personal mortgage of up to T$100,000.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (TW:2330), the world’s largest contract chipmaker, this month trimmed its full-year revenue outlook due to weakening demand.

Taiwan has reported 429 coronavirus infections and six deaths, far lower than most of its neighbours.