November 28, 2021
  • November 28, 2021

EDITORIAL: The economy still faces headwinds

By on October 31, 2021 0

Taiwan’s GDP grew 3.8 percent annually in the third quarter of this year, the Budget, Accounting and Statistics Branch (DGBAS) said on Friday. Although lower than Bloomberg’s estimate of 4.3%, it exceeded the agency’s August projection of 3.31% growth.

Growth in the last quarter moderated from an annual expansion of 7.43% in the second quarter and an increase of 9.27% ​​in the first quarter, mainly due to a higher basis of comparison over the years. corresponding periods of last year.

Nonetheless, the economy rebounded in the last quarter from the previous one, with the country’s overall economic output growing at a seasonally adjusted annualized rate of 2.27% and a quarterly seasonally adjusted rate of 0.56, compared to contractions of 4.21 and 1.07% in the previous quarter respectively. , DGBAS data showed.

According to the agency, the main drivers of economic performance in the last quarter were gross capital formation, which jumped 27.97% year-on-year, compared to an 8.56% increase in the previous quarter; exports of goods and services, which rose 14.05 percent, following an increase of 22.62 percent in the second quarter; and public spending, which increased by 3.31%, against 2.46% in the previous quarter.

From an industry perspective, the performance of the manufacturing sector helped propel the country’s growth in the third quarter due to strong external demand for semiconductors, electronic components and information technology products and communications. Domestic investment also continued to support the economy, as the machinery, transportation equipment and construction sectors posted strong spending figures.

Private consumption remained lackluster and contracted 5.49% year-on-year, due to a local outbreak of COVID-19 that emerged in mid-May.

Overall, the country’s economy grew 6.74% from the previous year in the first three quarters. It is highly likely that the DGBAS will further improve its estimate of GDP growth for the year next month given a host of positive economic data, such as export orders, industrial production and the index. manufacturing purchasing managers, who suggest a continued recovery in world trade. , as well as the effects of a government-backed stimulus package to stimulate consumer spending.

Nonetheless, the headwinds to growth remain. Government-approved foreign direct investment (FDI) in the first nine months of the year fell 30.47 percent annually to $ 4.42 billion, according to data released by the Investment Commission on October 22. . The commission blamed the COVID-19 pandemic for the decline, saying investment by multinationals has slowed dramatically.

However, the slowdown was not in line with global trends. The United Nations Conference on Trade and Development released its Investment Trends Monitor report on October 19, which indicates that global FDI rebounded stronger than expected in the first half of the year to reach $ 852 billion , recouping more than 70 percent of last year’s losses from the pandemic. It’s still unclear whether Taiwan’s drop in FDI is a temporary phenomenon or a sign of a worrying trend, but it deserves attention, especially as the country’s economy remains resilient amid the pandemic.

Taiwan also faces several challenges in the global economic environment, such as the US Federal Reserve’s early decision to ease its accommodative monetary policy, a lackluster economic recovery in China, and threats of the spread of COVID-19 in Southeast Asia. Southeast, as well as increasing inflationary pressures and geopolitical conflicts around the world. At home, the government is faced with a multitude of uncertainties, including vaccination rates, border controls and the December 18 referendums, which DGBAS statisticians have not yet taken into account when calculating their estimates. GDP growth estimates.

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