Taiwan’s Q2 GDP seen returning to growth

TAIPEI: Taiwan´s trade-reliant economy is expected to have returned to on-year growth in the second quarter from three straight quarters of decline, as the contraction in exports slows and investment increases.

The expected growth, however, would be unlikely to change the government´s meagre full-year GDP estimate of 1.06 percent with weak global demand maintaining pressure on the island´s central bank to trim interest rates again.

"Private investments topped expectation and the drag by exports on the economy had narrowed in Q2," said analyst Anita Tsai of Masterlink Securities in Taipei.

"But global economic growth has been slow.

Taiwan has been hit too.

"A Reuters poll showed Taiwan´s economy was expected to have returned to on-year growth of 0.56 percent in the second quarter from three straight quarters of decline.

Economists do not provide quarter-on-quarter estimates, though the government does report annualised, seasonally adjusted quarterly figures.

The government will issue preliminary gross domestic product data on Friday at 0030 GMT.

The expected launch of Apple Inc´s new iPhone model later this year and typically stronger demand ahead of the Christmas shopping season are unlikely to provide much support for Taiwan´s exports in the second half of this year, some analysts said.

Taiwan is a major Asian production house for global tech names such as Apple, making components for smartphones, notebook PCs and other gadgets.

The island´s export orders, a gauge of global technology demand, contracted for the 15th straight month in June, though at a slower-than-expected pace while exports fell for the 17th month in a row.

Taiwan´s central bank is widely expected to cut interest rates again in its September quarterly meeting following four straight rate cuts since last September.

"We think Taiwan needs to cut the rate further.

Asian countries will need to cut interest rates gradually," said Frank Lee, north Asia chief investment officer of DBS Bank.

DBS sees Taiwan´s GDP growing 0.9 percent in 2016, he added.

Taiwan slashed its 2016 GDP outlook for the third time in May to 1.06 percent, slower than 1.47 percent growth it had previously forecast.