Taiwan GDP pegged at 3.2%

Blame it on sluggish exports in 2Q due to lacklustre global economic performance.

According to DBS, the headline number should be fairly close to the preliminary estimate of -0.2% YoY or 3.2% QoQ saar. The breakdown will show that exports remained sluggish in 2Q due to the lackluster global economic performance.

Here's more from DBS:

Consumption growth slowed markedly, as a result of domestic policy changes that boosted energy inflation and dampened consumer sentiment. Thankfully, investment picked up in 1Q-2Q after falling excessively during the second half of 2011 (in QoQ terms), which helped to prevent a further drop in the QoQ GDP growth rate.

The 2Q GDP is backward looking. The focus today is whether the statistics agency will further cut the full year growth estimate. The current official forecast of 2.08% is based on the assumption that growth will recover to the potential rate from 3Q onwards. The data available for 3Q (July trade and PMI) however, suggest that the chance of an imminent recovery is diminishing.

It will be no surprise if the government further downgrade the whole year forecast to the 1% level when they announce the latest review today. We expect growth of only 1.3% in 2012.

Meanwhile, the government today will also release the GDP forecast for next year. It is interesting to watch whether the 2013 forecast will be kept close to the long term average at 4%. As the economy highly relies on exports, the performance next year will largely hinge on the global economic development.

During the latest “World Economic Outlook”, the IMF predicts global growth of 3.9% in 2013, up from 3.5% this year. Nonetheless, the IMF underscores that the downside risks to its forecast continue to loom large, due to the risks of insufficient policy actions to resolve European debt crisis and deal with the fiscal cliff in the US.

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