Taiwan Q3 GDP grows faster than expected on lifting of COVID curbs

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Cranes are pictured during a rainy day at a construction site in Taipei

TAIPEI (Reuters) -Taiwan’s economy grew much faster than expected in the third quarter and at its fastest pace since the last three months of 2021, boosted by a revival of domestic demand following the easing of COVID-19 curbs even as exports slowed.

For the July-September period, annual gross domestic product (GDP) grew by 4.1% from the same period a year earlier, compared with 3.05% for the previous quarter, preliminary data from the statistics agency showed on Friday.

That was well above an increase of 3.2% forecast in a Reuters poll, and the fastest since a 5.32% expansion in the fourth quarter of last year.

Compared with the previous quarter, the economy expanded 6.63% on a seasonally adjusted annual rate.

The statistics office said there was a “significant return” of consumer spending in the third quarter, as the government relaxed controls to stop the spread of COVID, though off a low base given tight curbs at the same time last year.

Statistics official Wu Pei-shuan said that exports performed worse than expected with an “obvious cooling” in the global economy, but domestic spending had been unleashed as the government moved to a living-with-COVID strategy.

“Private consumption has rebounded strongly, and domestic tourism has recovered,” Wu said.

Policymakers have said they expect full-year 2022 growth of less than 4%, downgrading it from previous forecasts of more than 4% and slower than the 6.45% logged for 2021. That was the fastest rate in more than a decade since a 10.25% expansion in 2010.

First Capital Management analyst Chengyu Liu said fourth-quarter growth was likely to be lower given the slower exports, and coming off a high base last year.

The strong third quarter would likely give room for the central bank to safely raise the benchmark interest rate again at its next quarterly meeting in December, Liu added, for the fourth time this year, to help rein in inflation.

Total third-quarter exports rose only 3.38% from a year earlier in U.S. dollar terms, the statistics agency said, impacted by high global inflation, COVID lockdowns in Taiwan’s largest export market China and generally weaker global demand.

The economy in China, Taiwan’s largest trading partner, expanded 3.9% in the third quarter year-on-year, faster than expected and quickening from the 0.4% pace in the second quarter.

The International Monetary Fund this month adjusted higher its full-year growth forecast for Taiwan to 3.3% from 3.2% seen in April.

Taiwan will release revised GDP figures on Nov. 29, including full-year growth forecasts for 2022. In August, the statistics agency revised down its full year outlook to 3.76% from a previous forecast of 3.91%.

(Reporting by Jeanny Kao and Liang-sa Loh; Writing by Ben Blanchard; Editing by Alex Richardson, Robert Birsel)