Taiwan's Q2 current account surplus hits 3rd highest on AI boom

Taipei, Aug. 21 (CNA) Taiwan's current account surplus in the second quarter of this year hit its third-highest level ever on the back of robust demand for emerging technologies during the current AI era, the Central Bank of the Republic of China (Taiwan) said Thursday.

The latest balance of payments data released by the central bank showed that Taiwan's current account surplus totaled US$58.49 billion in the second quarter, only trailing US$69.94 billion in the fourth quarter of last year and US$62.54 billion in the first quarter of this year.

The current account mainly measures the exports and imports of a country's merchandise and services.

Speaking with reporters, Tsai Mei-fen (蔡美芬), deputy director of the central bank's Department of Economic Research, said Taiwan served as a hub of the global AI development, witnessing its goods exports hit a new of over US$200 billion and goods imports smash records to reach around US$152.94 billion in the second quarter.

In addition, Tsai said, tremendous AI business opportunities also boosted financial service exports to a new quarterly high of US$1.47 billion in the April-June period.

In the second quarter, Taiwan recorded a net fund outflow in its financial account at US$53.79 billion, up US$34.57 billion from a year earlier, marking the 64th consecutive quarter of a net fund outflow, the central bank said.

The central bank said the direct investment account recorded a net asset increase of US$8.47 billion in the second quarter. Of the components in the direct investment account, outbound direct investment by residents and inward direct investment by nonresidents posted net increases of US$11.04 billion and US$2.57 billion, respectively.

Tsai said the second quarter outbound direct investment by residents surpassed the US$10 billion level for the second quarter in a row as Taiwan's ICT firms were keen to expand their production overseas to meet AI demand.

In the second quarter, the portfolio investment account saw a net asset increase of US$4.81 billion. Portfolio investments by nonresidents recorded a net outflow of US$632 million in the second quarter, sharply down from US$25.66 billion in the first quarter and US$17.43 billion in the fourth quarter of last year.

The significant decline in net outflow in portfolio investments eased pressure to push down the Taiwan dollar and also reduced the central bank's efforts to smooth volatility in the local foreign exchange market, Tsai said.

Addressing concerns that investors will keep moving funds out of the country and into U.S. dollar-denominated assets, the central bank said net financial account outflows were common among countries like Taiwan that have a long-term current account surplus.

Other countries, including Japan, South Korea, Singapore and Germany, which all had long-term current account surpluses, have also tended to record net financial account outflows, the central bank said.