Taiwan's GDP contracted 1.01% y/y in Q3, below expectation, marking the worst performance since September 2009. On a q/q sa basis, Q3 GDP narrowly avoided technical recession and rose marginally, by 0.05% q/q sa, after a deeper contraction of 1.68% q/q sa in Q2 (Q1: +0.57%). Overall, net exports continued to be the dominant drag, subtracting 1.11pp from the overall y/y growth (Q2: -2.20pp; Q1: +2.59pp).
Private consumption, the key pillar of support this year, also slowed in Q3 and contributed a more modest 0.47pp to the headline (Q2: +1.52pp; Q1: +1.94pp). Unsurprisingly, the sluggishness in goods exports amid weaker external demand and high inventories continued to weigh on growth. This was exacerbated by increased net imports in services, as outbound tourism was boosted by weaker QE currencies such as the EUR and the JPY.
"In light of today's weaker-than-expected Q3 GDP outturn, the full-year growth forecast is lower by 20bp, to 0.8% y/y. While the economy will bottom in Q3, but a more modest recovery is foreseen in Q4, as the near-term outlook for electronics remains muted", estimates Barclays.
In reaction to the growth risks, the government today also announced TWD4bn of measures designed to stimulate consumption - namely, subsidies for the purchase of new mobile handsets and select home appliances, effective from 7 November to 29 February.
