Yimou and Jeanny Lee

TAIPEI (Reuters] -The first quarter of Taiwan’s economic growth was slower than the three previous months, but it still did better than anticipated. This is due to strong exports and increasing demand for chips worldwide. However, weaker consumer confidence impacted the economy.

The annual GDP (gross domestic product) growth for January-March was 3.06%, as compared to 4.86% in the last quarter. This is preliminary data that were released Thursday by the Statistics Agency.

This was more than the 2.9% increase predicted in a Reuters poll. However, it was also the slowest growth rate since the second quarter 2020 when the economy grew 0.63% annually.

Taiwan is a major hub of the global supply chain for technology giants like Apple Inc (NASDAQ):. Taiwan’s economy outperformed other regional economies during the COVID-19 Pandemic. It has also benefited from strong demand for tech exports, as more people are now able to work and study from their homes.

The global shortage in semiconductors is also a problem for Taiwanese chipmakers, which has prompted them to increase production.

Taiwan’s 2021 exports grew 29.4%, with the country continuing to reap the benefits of strong global demand.

The agency reported that total first quarter exports rose 23.5% compared to a year ago in U.S. dollars terms.

It attributed the quarterly GDP growth to stronger-than-expected exports, driven by continued international demand for the island’s tech products including semiconductors.

Inflation slowed domestic consumption’s recovery after COVID-19 was relaxed. Consumption grew only marginally during the quarter.

Taishin Securities Investment Advisory Co’s economist Kevin Wang stated that domestic demand for the second quarter may be weaker due to a spike in COVID-19, however he was still sticking with a forecast of 4.2% growth.

He stated that the U.S. must monitor whether exports have been affected by worsening inflation and whether China’s clampdown has had an expansion on supply chain and production.

China’s economy expanded faster than expected by 4.8% in the first quarter. However, there is a danger of a slowdown in coming months as the Ukraine war and COVID-19 restrictions, particularly in Shanghai, disrupt production and reduce demand.

Taiwan will publish revised GDP data next month. These figures include full-year growth projections for 2022.