Taiwan Economic Forecast

Taiwan Economic Outlook

January 22, 2019

All available data indicates the economy continued to weaken markedly in the fourth quarter after starting to slow in the third quarter. This loss of momentum is most likely to persist into 2019, as the country grapples with the impact of a slowdown in China and heightened trade frictions. The manufacturing PMI entered contractionary territory in October and continued to weaken throughout the quarter, weighed notably by lower new demand as a direct result of the U.S.-China trade war. Consumer confidence also fell every month in the quarter. Meanwhile, export growth was nearly flat year-on-year in Q4 as Taiwan’s flagship trade sector suffered both from lower Asian demand and from a downturn in the tech cycle, notably for smartphones. Export order data for November also signals the sector will likely remain weak in Q1. On 11 January, Parliament approved the government’s TWD 2.0 trillion budget for 2019. On the political front, tensions with mainland China escalated in recent weeks after Xi Jinping’s declaration on 2 January that China would not discount the use of military force to complete reunification with the island. Unsurprisingly, this drew a swift rebuke from President Tsai.

Taiwan Economic Growth

Economic activity will likely be hit by growing headwinds this year, due to its significant exposure to the Sino-American trade war—especially so in the tech sector. Taiwan’s high dependence on China is also a key vulnerability, owing to risks of a mainland slowdown and rising cross-strait tensions. Nonetheless, a TWD 228 billion infrastructure package approved for 2019 and 2020 should support investment momentum this year and next. Met the why particular panelists forecast GDP growth of 2.2% in 2019, which is unchanged from last month’s forecast, and 2.1% in 2020.

Taiwan Economy Data

20132014201520162017
Population (million)23.423.423.523.523.6
GDP per capita (USD)21,89422,71622,55922,62924,112
GDP (USD bn)512532530533575
Economic Growth (GDP, annual variation in %)2.24.00.81.42.9
Consumption (annual variation in %)2.33.42.62.32.3
Investment (annual variation in %)5.32.11.62.30.0
Industrial Production (annual variation in %)3.26.4-1.32.05.0
Retail Sales (annual variation in %)2.03.90.31.91.2
Unemployment Rate4.24.03.83.93.8
Fiscal Balance (% of GDP)-1.4-0.80.1-0.3-1.4
Public Debt (% of GDP)33.832.831.631.230.7
Money (annual variation in %)5.86.15.83.63.6
Inflation Rate (CPI, annual variation in %, eop)0.30.60.11.71.2
Inflation Rate (CPI, annual variation in %)0.81.2-0.31.40.6
Inflation (WPI, annual variation in %)-2.4-0.6-8.9-3.00.9
Policy Interest Rate (%)1.881.881.631.381.38
Stock Market (annual variation in %)11.98.1-11.411.015.0
Exchange Rate (vs USD)29.8331.6332.8332.4529.67
Exchange Rate (vs USD, aop)29.6830.3131.7632.2430.42
Current Account (% of GDP)9.711.414.113.714.4
Current Account Balance (USD bn)49.960.474.972.882.9
Trade Balance (USD billion)33.438.248.149.858.0
Exports (USD billion)311320285280317
Imports (USD billion)278282237231259
Exports (annual variation in %)1.62.8-11.9-1.813.2
Imports (annual variation in %)0.21.4-15.8-2.812.4
International Reserves (USD)417419426434452
External Debt (% of GDP)33.233.430.032.331.6

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Taiwan Facts

ValueChangeDate
Bond Yield0.841.28 %Feb 14
Exchange Rate30.830.07 %Feb 14
Stock Market11,0890.37 %Feb 14

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