Taiwan's GDP to dip to 2.9%

Blame it on weak exports.

According to DBS, the advance estimate of 1Q GDP (tomorrow) may disappoint. Growth is likely to slow notably to the 2.5%-2.9% YoY range, down from 3.7% in the preceding quarter, and well below the consensus forecast of 3.3%. The QoQ growth should drop more markedly to 0-1.0% from a very strong 7.3%QoQ ssar in 4Q12.

Here's more:

The disappointment mainly came from a slower than expected recovery in exports, against the backdrop that global demand conditions remained fundamentally weak.

The key growth driver in 1Q should be investment, mirroring the uptrend in monthly indicators including capital goods imports and building permits granted for construction.

This was aided by recovering capacity utilization amongst manufacturers, upturn in the domestic property market, and rising investment
from offshore Taiwanese firms on the back of the government’s policy incentives.

The strong rise in investment also boosted import demand, which would in turn reduce the contribution of net exportsto headline growth.

Despite the 1Q slowdown, we reckon thatthe downside risks to the official GDP growth forecast (3.6%for 2013) are limited. We continue to expect growth reacceleration in 2H after global demand recovery gathers steam. The central bank is expected to maintain a neutral policy stance atJune’s policy meeting.

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