BMI View: Over 2015, the outperforming freight mode in terms of year-on-year ( y-o-y ) tonnage growth is set to be the air freight sector with annual gains of 4.08% pencilled in for the year. The other modes are set to struggle to top 1% y-o-y growth this year, but this will still represent an improvement year-on-year for both road and rail. Growth in Q1 2015 was fuelled by both export and private consumption growth, which largely outweighed the collapse in both government consumption and gross fixed capital formation, proving positive for the country's freight modes.
Taiwan's Q1 2015 real GDP grew by 3.5% year-on-year (y-o-y), picking up slightly from 3.3% in Q4 2014. We maintain our real GDP growth forecast of 3.5% for 2015 amid a fairly positive domestic outlook, but note that a challenging external environment will continue to present headwinds to Taiwanese exports over the short term. We do caution, however, that any resumption in cross-strait political tensions is likely to have rapid and negative consequences for the Taiwanese freight mix.
Taiwan relies on its road freight network above all others and in 2015 we expect this mode to perform modestly with annual growth of 0.97% pencilled in to reach 654.65mn tonnes - this has been revised downwards from last quarter with an improving domestic demand picture being offset by external headwinds, such as growing competition from regional peer South Korea as a trade partner to China. This follows two volatile years, with a big contraction of 15.62% registered in 2013, followed by large growth of 16.48% in 2014. Road freight's dominance in Taiwan's freight transport mix has developed due to the country's relatively dense road network, with the Taiwan's roads stretching for 41,475km, compared with its rail freight network, which extends for just 1,580km.
Meanwhile, the rail freight sector is set to see the slowest growth rate in 2015, coming in at just 0.86%, albeit up on 2014's 0.50% increase, a knock-on effect of the fact that Taiwan is an island and so relies far more on its shipping sector to serve its trade needs with other countries and road freight for its domestic needs. Over the medium-term forecast period, however, we anticipate this level of growth increasing 1.93%; underpinning rail freight growth is falling oil prices, which will continue to provide some support for the domestic economy.
Over the medium term, between 2015 and 2019, we expect that air freight will see the strongest growth, although we do caution that the country's over-reliance on tech-related exports leaves Taiwan somewhat vulnerable to changes in the global electronics business cycle. Maturity of the market means that growth over our forecast period will not reach the heady heights of the high double-digit growth of 2010, but nonetheless, growth in this sphere will continue to foster steady y-o-y growth.
Key BMI Forecasts
We forecast total road freight volumes will rise by 0.97% y-o-y over 2015 to reach 547.20mn tonnes.
We forecast total rail freight volumes will increase by 0.86% y-o-y over 2015 to reach 11.32mn tonnes.
We forecast total air freight volumes will rise by 4.08% y-o-y over 2015 to reach 1.23mn tonnes.
We forecast total trade value to grow by 4.60% y-o-y to reach USD698.62bn