Taipei: Taiwan's current account surplus in the second quarter of this year reached its third-highest level ever, driven by strong demand for emerging technologies during the ongoing AI era, as reported by the Central Bank of the Republic of China (Taiwan) on Thursday.
According to Focus Taiwan, the latest balance of payments data from the central bank revealed that Taiwan's current account surplus amounted to US$58.49 billion in the second quarter. This figure is only surpassed by US$69.94 billion in the fourth quarter of the previous year and US$62.54 billion in the first quarter of the current year. The current account primarily measures a country's exports and imports of merchandise and services.
Tsai Mei-fen, deputy director of the central bank's Department of Economic Research, noted to reporters that Taiwan has become a hub for global AI development. This has resulted in goods exports exceeding US$200 billion and goods imports reaching approximately US$152.94 billion in the second quarter.
Additionally, Tsai mentioned that the burgeoning AI business opportunities propelled financial service exports to a new quarterly high of US$1.47 billion during the April-June period. During the same quarter, Taiwan experienced a net fund outflow in its financial account amounting to US$53.79 billion, an increase of US$34.57 billion from the previous year, marking the 64th consecutive quarter of a net fund outflow, according to the central bank.
The central bank also reported a net asset increase of US$8.47 billion in the direct investment account for the second quarter. Within this 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 highlighted that outbound direct investment by residents surpassed the US$10 billion mark for the second consecutive quarter as Taiwan's ICT firms sought to expand overseas to cater to AI demand.
In the second quarter, the portfolio investment account experienced a net asset increase of US$4.81 billion. Nonresident portfolio investments recorded a net outflow of US$632 million, a sharp decline from US$25.66 billion in the first quarter and US$17.43 billion in the fourth quarter of the previous year. Tsai stated that the significant decrease in net outflow in portfolio investments reduced pressure on the Taiwan dollar and minimized the central bank's need to manage volatility in the local foreign exchange market.
Addressing concerns about potential investor movement of funds to U.S. dollar-denominated assets, the central bank emphasized that net financial account outflows are common among countries like Taiwan with a long-term current account surplus. Other nations with similar surpluses, such as Japan, South Korea, Singapore, and Germany, also tend to exhibit net financial account outflows, the central bank noted.