Taiwan Economic Forecast

Taiwan Economic Outlook

October 16, 2018

The economy appears to have decelerated markedly in the third quarter, after growth reached a three-year high in the second quarter, notably due to a sharp loss of export momentum amid the US-China trade war. Export growth receded sharply in Q3 after reaching double-digits in Q2, and is thus poised to have weighed on the already weak investment momentum. Meanwhile, the PMI fell each month in Q3, and its average reading was the lowest since Q2 2016. On a more positive note, private consumption likely remained solid thanks to the tight labor market, while government spending is seen accelerating throughout H2 and beyond, given that only a third of the TWD 117 billion infrastructure package approved for 2018 had been disbursed as of the end of June. The FY19 budget proposal unveiled on 27 September also plans for increases in defense, education and economic development expenditures.

Taiwan Economic Growth

Growth is seen moderating in 2019 and 2020 as the softening external sector should be superseded by domestic consumption as the main driver of the economy. Higher public spending should, however, continue to support activity, thanks to the recent approval of an additional TWD 228 billion infrastructure plan, with TWD 115.3 billion and TWD 122.2 billion allocated for 2019 and 2020, respectively. Main downside risks include the US-China trade dispute, increased migration of high-skilled workers and heightened diplomatic tensions with the Chinese mainland. Met the why particular panelists forecast GDP growth of 2.3% in 2019, which is unchanged from last month’s forecast, and 2.1% in 2020.

Taiwan Economy Data

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 %)
Consumption (annual variation in %)
Investment (annual variation in %)
Industrial Production (annual variation in %)3.26.4-
Retail Sales (annual variation in %)
Unemployment Rate4.
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 %)
Inflation Rate (CPI, annual variation in %, eop)
Inflation Rate (CPI, annual variation in %)0.81.2-
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

Bond Yield0.941.28 %Oct 18
Exchange Rate31.000.07 %Oct 18
Stock Market9,9540.37 %Oct 18

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