Country Economic Forecasts > Taiwan

The Taiwanese economy ended 2015 on a positive note after two quarters of recession in Q2 and Q3. Seasonally adjusted GDP grew by 0.5% on the quarter in Q4 (and by 0.7% in 2015 as a whole), largely driven by a rebound in consumer spending and benefiting from surprisingly robust investment. Although the sharp external weakness persisted in January, with merchandise exports and imports (in US$ terms) still down 13% on the year, the manufacturing PMI signalled a modest expansion in industry at the start of this year. And the sizeable increase in imported capital goods registered last month suggests a reasonable investment performance in Q1, supporting a gradually improving outlook.Nevertheless, given subdued trade flows currently and the high level of uncertainty about the state of the global economy, we expect a more broad-based expansion to be delayed until H2 2016. Consequently, we have cut our forecast for GDP growth for 2016 to 1.7% (2.2% previously), with an interest rate cut of 25bp pencilled in for March.