Taiwan's economic growth held steady at around 3.5 per cent in the first quarter from the prior three months, thanks to gains from international trade, but an underlying slowdown in shipments and soft domestic demand could impede the export-reliant economy.
A patchy global economic recovery - highlighted by weakness in Taiwan's major trading partners mainland China and the United States - will remain a headwind for the island and likely force policymakers to keep monetary conditions stable and accommodative, economists said.
"There are signs the growth momentum is starting to lose steam," said Raymond Yeung, senior economist at ANZ Bank in Hong Kong, pointing to worrying weakness in domestic investment and uncertainty over global demand.
Last month, TSMC, the world's largest contract chipmaker, sliced its capital expenditure plan for 2015 by US$1 billion and forecast weaker revenue outlook in the current quarter.
Taiwan's gross domestic product expanded 3.46 per cent year on year in the three months to March, largely as expected and a touch faster than the 3.35 per cent gain booked in the final quarter of 2014.
Gains in exports of goods and services were still the main driver in the first quarter for economic growth, while weak government consumption and capital formation - gauges for domestic investment -- detracted from growth, according to the Directorate General of Budget, Accounting and Statistics.