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Taiwan posts solid Q2 GDP growth ahead of tech peak season

[TAIPEI] Taiwan recorded solid economic growth in the second quarter on Friday, with global demand for its key technology exports expected to stay robust into the second half of the year.

The island's tech manufacturers have rushed to meet orders for smartphones and other new gadgets in the April to June quarter, with exports and export orders performing better than forecast and adding to signs economic momentum remains solid.

Gross domestic product (GDP) rose 2.10 per cent in the April-June period from a year earlier, matching economists'median forecast in a Reuters poll, but the pace slowed from 2.6 per cent growth in the previous quarter.

On a seasonally adjusted and annualised basis, the economy grew 0.59 per cent in the second quarter, slowing from 3.82 per cent in the first quarter.

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Some analysts warned that recently strong export and order figures may look more positive than the underlying situation.

"Headline numbers of exports and export orders are in USD terms. And the Taiwan dollar appreciated a lot this year. If we exclude exchange rate effects, growth of exports and orders is less impressive in the second quarter," Claire Huang, a Greater China economist at Societe Generale, said ahead of the data.

Uneven growth in industrial production, which appears to be lagging the recovery in exports, could be due to inventory destocking, analysts said.

"It seems that the non-electronics manufacturers have postponed their production plans in the second quarter, as confidence was weighed down by the correction in the global commodities market," Ma Tieying, an economist at DBS Bank, said.

Leading indicators point to momentum sustaining in the coming months.

Taiwan's export orders in June rose faster than expected due to strong global growth and robust demand for electronic components, with orders from China and the United States - the island's two biggest markets - rising in double digits.

The government recently raised its 2017 GDP estimate to a three-year high of 2.05 per cent growth due to a brightening export outlook.

Stronger exports and subdued inflation have given the central bank leeway to keep its policy rate unchanged, though it is keeping an eye on US policy and the Federal Reserve's tightening cycle.