HSBC Expects Gradual Growth Recovery In 2024

The bank notes that base effects overstated Q1's strength, still it expects growth to continue to recover gradually through 2024.

HSBC: "While the %y-o-y momentum may look great, it is important to note that much of the %y-o-y acceleration in headline GDP growth came from favourable base effects (Taiwan's GDP had declined -1.0% q-o-q sa in 1Q23). Indeed, we prefer to look at sequential momentum to gauge the more current growth momentum, which showed that the pace of growth actually slowed significantly in the quarter (0.3% q-o-q sa vs. 2.3% in 4Q23).

However, we still see reasons for optimism for this year's growth recovery. Granted that the official seasonally adjusted data from the DGBAS is not available with advance estimate, our estimates suggest healthy momentum across various GDP segments. In particular, we believe private consumption continued to show resilience and gross capex picked up somewhat, while exports accelerated strongly. Indeed, much of the slowdown in headline GDP growth was likely driven by a strong rebound in imports (off the 4Q weakness), in part reflecting the healthy momentum seen for the other expenditure segments.

Looking ahead, we expect Taiwan's growth recovery to continue, albeit at a gradual pace. On private consumption, the softening over the recent quarters is in line with our view that the pace of growth has largely normalised after the phase of post-Covid catch up. Meanwhile, the healthy labour market and continued disinflation suggest that households' purchasing power will likely be sustained in the coming quarters as well."