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GAO Revises Q3 Economic Growth to 3.22% Due to Sluggish Private Investment, Annual GDP Estimate Revised to 1.55%

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The General Accounting Office (GAO) has released its estimate for the third-quarter economic growth rate, revising it down to 3.22% from the previously reported 3.44%. This adjustment primarily stems from weaker-than-expected private investment. If this trend persists in the fourth quarter, it would bring the year’s GDP estimate down to 1.55%. Wang Cuihua, a brief inspector at the GAO, noted that while manufacturer investment has slowed, it still surpasses pre-pandemic levels, indicating ongoing investment momentum. The GDP quarterly annual growth rate (saar) for the third quarter is 10.47%, signaling an overall economic improvement.

Regarding exports, the GAO reported a 5.08% drop in the third quarter compared to the same period last year. This performance, while slightly better than anticipated, reflects a slowdown in triangular trade and shipping services. However, a surge in tourism to Taiwan has buoyed service exports. Factoring in both goods and services, export growth is projected to be negative, revised down to -0.5%. Input also saw a negative growth of -4.87%, down from the initial estimate of -6.67%. This leads to foreign net demand contributing 2.16% to economic growth.

In terms of domestic demand, private consumption grew by 8.9% in real terms in the third quarter, a positive revision of 0.56%. This robust consumption, particularly in services, remains a key driver of growth. The GAO emphasized that consumption momentum continues post-pandemic, bolstered by rising stock market prices and pandemic prevention insurance claims. Meanwhile, Chinese domestic consumption saw an increase of 3.96% in the third quarter, and consumption abroad doubled, with travel expenditure having no net negative effect on overall GDP.

However, private investment has shown signs of slowing down. Although transportation vehicle investment has seen strong growth, end demand remains subdued. The pace of manufacturer investment has decelerated, particularly due to a high base effect. Imports of capital equipment denominated in New Taiwan dollars fell nearly 23% YoY in the third quarter. Semiconductor equipment imports recorded a 46% YoY decline. Domestic manufacturing investment and production also fell by 2.35%. Combined with inventory reduction, capital formation is projected to have a real negative growth of -14.04%, a revision from the initial estimate of -9.61%, contributing -3.93% to economic growth.

Wang Cuihua highlighted that from 2018 to 2022, private investment expanded for five consecutive years, with an average annual growth of 8.17%. Although the base effect has led to adjustments, the scale of investment still exceeds pre-pandemic levels, indicating persistent investment momentum. Presently, private consumption continues to grow steadily, and output is on an upward trajectory. These indicators suggest a shift away from the recessionary signals, though short-term economic fluctuations may persist.

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