International | May 19 2006
By Chris Shaw (Tokyo)
Taiwan appears to be in the same position as Japan was a couple of years ago, as it is recording reasonable economic growth figures but the performance is being driven by exports and the general economy is yet to show signs of this growth being sustainable.
Economic growth for the first quarter came in at 4.9%, which was slightly below consensus of 5%. About 75% of the increase can be attributed to higher exports, which showed an increase of 14.5% year-on-year.
At the same time consumer spending continues to be weak, recording growth of 2.1% for the period compared to 2.8% for the previous quarter, while growth in personal loans is expanding but at a slower pace.
This leads ABN Amro to suggest continued weakness in consumer spending is likely, meaning a sustained economic recovery remains some time away. Adding to this view is the potential for political issues to hold back the economy thanks to the ongoing divisions regarding the island’s relationship with China.
The broker cautions there could be a division within the economy going forward, with the electronics sector recording solid returns but the rest of the economy struggling, so holding back overall growth.
The broker is forecasting growth of 4.2% for the full year, highlighting the economy’s current reliance on exports.
