April 27, 2018 / 9:52 AM / in 23 days

UPDATE 1-Exports propel Taiwan's Q1 GDP, but tech cycle peaking

* Taiwan Q1 GDP +3.04 pct y/y, firmer than Reuters poll

* GDP +0.33 pct s/adj quarter-on-quarter vs +1.07 pct in Q4

* Tech exports expected to face headwinds in H1

By Jeanny Kao

TAIPEI, April 27 (Reuters) - Taiwan’s economic growth stayed resilient in the first quarter despite signs that global technology demand is softening, fuelling optimism the island’s export strength can be sustained.

First quarter gross domestic product expanded 3.04 percent from a year earlier, preliminary data from the statistics agency showed on Friday. Growth was better than 2.84 percent forecast in a Reuters poll but less than the 3.28 percent pace in the fourth quarter - the fastest in nearly three years.

The economy grew a far slower seasonally adjusted 0.33 percent from the fourth quarter.

“Benefitting from the global economic recovery and new technology momentum, the semiconductor market flourished and machinery demand was hot,” the government said in a statement.

The economy got a major boost last year from launches of new smartphone models of Apple Inc’s iPhone and other tech gadgets, but the electronics cycle is hitting a peak.

“Looking ahead, we think growth will continue to cool over the coming months, averaging about 2.5 percent this year. On the plus side, domestic demand should remain healthy, supported in part by more rapid infrastructure spending,” Chang Liu, an economist with Capital Economics, said in a research note.

The government said on Friday that global developments will impact its outlook for the rest of the year.

“Economic performance is currently steadily growing, but in the future we still need to closely follow international trade developments, especially whether trade conflicts will intensify,” Wei-Jie Huang, senior executive at the Directorate General of Budget, Accounting and Statistics, told a news conference.

TECH SLOWDOWN EXPECTED

In February, the government nudged up its full-year 2018 growth outlook to 2.42 percent from 2.29 percent forecast in November.

Some economists are questioning the trade-reliant economy’s ability to maintain its vigour, given indications that the electronics cycle is peaking and as Asian exporters confront trade protectionism.

As concerns in the tech industry centre on the sales of high-profile tech gadgets such as Apple Inc’s iPhone X, some analysts expect any lacklustre performance there to hit the island’s exports.

Taiwan Semiconductor Manufacturing Co Ltd, the world’s largest contract chipmaker, trimmed its full-year revenue target last week on softer demand for smartphones, sending its shares and other Apple Inc supplier stocks tumbling.

Chang Liu of Capital Economics, however, noted that domestic demand in Taiwan remained strong in the first quarter.

“Household spending growth increased slightly to a multi-year high of 3.0 percent last quarter, and government spending jumped.” (Additional reporting by Jess Macy Yu Editing by Jacqueline Wong)

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