January 28, 2014 / 2:16 AM / 4 years ago

UPDATE 1-Taiwan Q4 GDP beats forecasts; China a concern for 2014

(Adds detail, context, quotes)

By Faith Hung and Jeanny Kao

TAIPEI, Jan 28 (Reuters) - Taiwan said its export-driven economy grew a preliminary 2.92 percent in the October-December quarter versus a year ago, handily beating the median forecast of 1.8 percent in a Reuters poll.

For all of 2013 the economy grew 2.19 percent, its highest since 2011, when it expanded 4.19 percent, the government statistics agency announced on Tuesday.

In November, it had trimmed the full-year forecast to 1.74 percent growth from 2.31 percent.

The government’s revised last-quarter number will be finalised in coming weeks.

“Exports, consumption and investments all exceeded expectations,” the statistics agency said in a statement.

Consumption rose 3.25 percent in Q4 from 1.69 percent in the year-ago period, while gross capital formation grew 9.74 pct vs 7.38 percent in the year-ago period.

Manufacturing was the main contributor to economic growth, contributing 0.81 percentage points to the GDP growth rate, with wholesale and retail trade adding 0.52 percentage points.

The government did not amend its outlook for economic growth this year. In late November, the statistics agency cut its 2014 outlook to 2.59 percent from 3.37 percent.

The island’s economy, which relies heavily on trade, is expected to face headwinds again this year after struggling last year with sluggish exports.

Analysts attributed the slow growth largely to China, the Taiwan’s biggest trade partner.

“Although the official Q4 data on exports, industrial output and GDP were strong, we are still conservative about this year,” said Woods Chen, an analyst at Taipei-based Ta Chong Bank.

“It is mainly due to concern emerging markets will be hit by the Chinese economy slowdown and the impact of the Fed’s tapering,” he said.

Taiwan is a major manufacturer of high-tech devices and the island’s growth is often viewed as a bellwether for global demand for consumer electronics.

The island’s exports contracted 1.9 percent in December from a year earlier. But that month’s export orders rose a surprisingly robust 7.4 percent on an annual basis, thanks to solid electronics demand.

That good news for Taiwan was undercut last week when a preliminary survey showed that activity in China’s factory sector contracted in January for the first time in six months.

The news pointed to a weak start for the economy in 2014 as Chinese policymakers seek to implement major reforms and curb high debt levels to contain financial risk.

Still, most economists expect China’s growth to remain relatively robust at 7.4 percent for the full year, compared with 7.7 percent in 2013, according to a recent Reuters poll.

Taiwan’s Foxconn Technology Group, the major supplier of Apple Inc’s iPhones and iPads, may build high-tech factories in the United States and low-cost plants in Indonesia as the appeal of ‘made in China’ fades into a burden.

Beset by rising costs and labor unrest in China, Chairman Terry Gou told employees on Sunday that Foxconn is considering diversifying away from its manufacturing heartland. The world’s largest contract maker of electronic goods has little choice if it is to protect margins and stay ahead of peers who have adapted the Foxconn playbook into their own success stories. (Additional reporting by Roger Tung and Lin Miao-jung; Editing by Eric Meijer)

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