Taiwan’s economic growth is falling from a more than 10-year peak last year, and the once-blooming semiconductor industry is also facing downside risks as the U.S. and Chinese economies struggle and global demand for electronics and semiconductors begins to weaken.
According to a Bloomberg survey, economists expect Taiwan’s gross domestic product (GDP) to grow by 3.15% in the second quarter from a year earlier, slightly higher than the 3.14% in the first quarter, but far worse than last year. Taiwan’s General Accounting Office is scheduled to release data in the afternoon on Friday (29th).
China and the United States are Taiwan’s two largest export markets, together accounting for more than 50% of the total export sales.
However, data from the U.S. Commerce Department on Thursday showed that gross domestic product contracted 0.9 percent in the second quarter, the second straight quarter of contraction and in line with the technical definition of a “recession.”
The epidemic containment measures and the “unfinished building” storm have also dragged down the Chinese economy, leading economists to revise down China’s growth forecast for this year to 3.9%. China’s GDP grew just 0.4% in the second quarter, the smallest gain since the first quarter of 2020.
The Financial Times of London reported that Beijing is seeking to provide up toRMB 1 trillion yuan ($148 billion) in loans to help builders complete and appease homebuyers who refuse to pay their mortgages.
Wu Zhuoyin, senior economist at Natixis, said: “Taiwan’s performance during the global outbreak was admirable, but now global inflation has worsened and demand has cooled, leading to a slowdown in Taiwan’s economic growth. Under such circumstances, the semiconductor industry, which has been in the limelight for a while, will also face downside risks.”
Taiwan’s exports, with semiconductors and electronic components as the bulk, shined during the epidemic, with the monthly amount rapidly expanding from less than US$30 billion before the epidemic to more than US$40 billion. However, there have been signs of a decline from the peak since the second quarter.
With the global “chip shortage” prompting massive investment in technology industries such as semiconductors, private fixed investment in Taiwan surged 19.9% last year, becoming the biggest driver of economic growth. This year is expected to remain an important support, but private investment growth has slowed to 6.6% in the first quarter.
Market research firm Gartner estimated on Wednesday that the global semiconductor industry revenue will grow by 7.4% this year, which is far less than the 14% predicted three months ago. The overall revenue next year is more likely to decline by 2.5%. The most prosperous cycle in history is coming to an end.