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Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Taiwan was facing a relatively low economic growth at 3% back in 2019 due to lower demand from trade partners and  trade tensions between China and the United States. In the context of the COVID-19 pandemic, the country registered a 3.1% GDP growth in 2020, one of the best results in the world, and 5.9% in 2021 (IMF, October 2021). Taiwan enjoys a good financial position, is the 4th electronic producer in the world and support R&D. According to the latest IMF forecasts, growth is expected to return  to 3.3% in 2022, subject to the post-pandemic global economy recovery.

According to the latest IMF estimates, public debt closed at 27.2% of GDP in 2021 and is expected to decrease in 2022 and 2022 with 22.8% and 18.2% respectively. The budget was in deficit at -1.9% in 2019 and increased due to the COVID-19 pandemic to -3.2% in 2020 but came back to +0.3% in 2021. It is expected to increase in the following years to 1.4% in 2022 and 2% in 2023. Inflation remained low at 1.6% in 2021. It should stay at this level with 1.5% and 1.4% in 2022 and 2023 (IMF, October 2021). Taiwan industries are affected by the international trade tensions, which include electronics (40% of Taiwan's exports), machinery, and chemicals. Chinese restrictions on travel from mainland China to Taiwan have also affected this sector. Other economic challenges include massive relocations that weaken industrial employment, uncompetitive service sector, insufficient infrastructure, and diplomatic isolation. Nevertheless, growth will be aided by infrastructure spending in healthcare and energy. The Infrastructure Development Plan will also modernise the rail network and water distribution. While budget deficits are expected, taxes were increase on income and financial transactions. Most public debt is domestic and owed in New Taiwanese dollars.

In 2022, the country’s most immediate challenge remains related to the economic, social and public health impacts of the COVID-19 pandemic, even though Taiwan had the pandemic well in hand from the start thanks to early and effective prevention. The government’s approach to the COVID-19 pandemic was among the world’s most successful. Avoiding any abusive restrictions, officials focused on contact tracing and quarantines for overseas travelers, and provided accurate and timely information to the public. Despite an surge in COVID-19 in 2021, growth was resilient, mainly thanks to its export-oriented manufacturing sector, as global demand, especially for electronics, was accelerating. The unemployment rate remained steady at 3.8%, virtually unchanged compared to 2020 and 2019 (3.9% and 3.7% respectively) and it is expected to remain at this level (3.6%) in 2022 and 2023 (IMF, October 2021). Social challenges include an ageing population, low birth rates, and a tense political agenda focusing on reunification with mainland China.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 612.17668.16785.59850.53899.87
GDP (Constant Prices, Annual % Change) 3.03.1e5.93.32.6
GDP per Capita (USD) 25,936e28,35833,40236,22738,397
General Government Balance (in % of GDP) -1.9-3.2e0.31.42.0
General Government Gross Debt (in % of GDP) 32.732.727.222.818.2
Inflation Rate (%) 0.5-0.21.61.51.4
Unemployment Rate (% of the Labour Force) 3.7e3.9e3.83.63.6
Current Account (billions USD) 65.1695.10122.79129.65128.61
Current Account (in % of GDP) 10.614.215.615.214.3

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

The agriculture sector contributes only very modestly to the GDP (around 2% in 2021 according to figures from the official statistical agency) and employs about 5% of the labour force in Taiwan. Taiwan's main crops are rice, sugar cane, fruits and vegetables. Taiwan's natural resources are limited. The Ministry of Labor allows dairy farms to hire migrant workers to compensate for labor shortages since 2019.

The secondary sector accounts for over 36% of GDP and employs about 35% of the labour force. Although traditional industries such as iron and steel, chemicals and machinery account for almost half of industrial production, new industries are the more dynamic. Taiwan is one of the world's largest suppliers of semiconductors, computers and mobile phones. It is also the largest supplier of computer screens.

Services accounted for 62.7% of GDP and employed 59.7% of the labour force in 2021. Taiwan, which faces the continued relocation of large labour-intensive industries to countries where it is less costly, will need innovative changes to move to an economy based on more advanced technologies and services to support them. According to Taiwan's tourism bureau, the number of foreign visitors to Taiwan in 2019 hit a record 11.84 million, a 7% increase from the previous year, and since then the country is waiting for the world's borders to open again to international travel.

The COVID-19 pandemic has had a powerful impact on the global economy since 2020. Nevertheless, the global recovery continues, even if the momentum has weakened towards the end of 2021 and uncertainty has increased as the pandemic resurged, leaving lasting imprints on medium-term performance. The surge in global inflation has investors fretting about future growth, but many economists say price surges will subside, making way for 4.7% global GDP growth in 2022 (International Monetary Fund - IMF, 2022 & Morgan Stanley, 2021). The impact of the pandemic appears to have affected both sides of most sectors and markets in Taiwan for the second year in a row - demand disruptions having run up against supply problems - making the short-term outlook uncertain for agriculture, industry and service sectors.

 
 
Monetary Indicators 20162017201820192020
New Taiwan Dollar (TWD) - Average Annual Exchange Rate For 1 USD n/an/an/an/an/a

- Latest available data.

 

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Foreign Trade

Foreign trade has been the engine of Taiwan's rapid growth during the past 40 years. Taiwan is very open to international trade, which represented over 62% of GDP in Taiwan from 2015 to 2018 (WTO, 2020) . Main exports include electrical equipment, machinery, computers, plastics, medical apparatus, mineral fuels and vehicles;  while imports include electrical equipment, mineral fuels, machinery and computers. The International Monetary Fund (IMF) is forecasting an increase of 4.7% in the volume of exports of goods and services of the country in 2022, after an increase of 2.8% in 2021 and a fall of 4.9% in 2020 due to the COVID pandemic, and an increase of 5% of its imports, after an increase of 15.2% in 2021 and a fall of 3.2% in 2020.

Taiwan's economy is export-oriented. Exports account for around 70 percent of total GDP and its composition have changed from predominantly agricultural commodities to industrial goods (now 98%) during the past 40 years. Main exports products are: electronics (33.1% of total), information, communication and audio-video products (10.8%), base metals (8.8%), plastics & rubber (7.1%), machinery (7.5 percent). Main exports partners are Mainland China & Hong Kong (40% of total), ASEAN countries (18.3%), USA (12%), Europe (9%) and Japan with 7% (Trading Economics, 2022).

A lack of natural resources had made Taiwan dependent on imports. Taiwan imports mostly parts of electronic products (18.2% of total), mineral products (15.2%), machinery (12.4%), chemicals (10.8%) and base metals (7.3%). Main import partners are Mainland China & Hong Kong (19.6% of total), Japan (17.6%), Europe (12.6%), USA (12.4%), ASEAN countries (11.8%) and Middle East (7.7%).

Since Taiwan's economy is highly export-oriented, it depends on a regime open to international trade and remains vulnerable to fluctuations in the global economy. Political tensions between separatist and reunificationists in Taiwan made reaching policy consensus difficult. The United States commercial battle against China has increased risk in Asian economies. Lack of international recognition from other countries also complicates Taiwan's international position.

Taiwan exported USD 330.6 billion of goods and USD 51.4 billion of services in 2020, and imported USD 287.1 billion of goods and USD 56.3 billion of services (WTO, 2021). Electronics industry is the largest industrial export sector and it receives the most US investment. Taiwan's trade surplus widened to USD 5.71 billion in November of 2021 from USD 5.14 billion in the same month last year, more than market expectations of USD 5.4 billion. Exports jumped 30.2% year-on-year to a fresh record of USD 41.58 billion, way more than market forecasts of a 23.05% hike, mainly driven by robust demand for tech products ahead of the peak holiday season. Accordingly, shipments rose the most for machinery & electrical equipment (25.5%); followed by base metals & articles thereof (67.7%); and plastic & articles thereof (33.4%). Meanwhile, imports advanced 33.8% to USD 35.86 billion, led by purchases of machinery & electrical equipment (20.3%); mineral products (133.9%); and chemicals with 37.7% (Ministry of Finance, R.O.C., 2021). Taiwan's membership in the WTO as an independent economy has also supported its commerce since 2002. The island has also a free trade agreement with New Zealand.

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 230,568259,266286,333287,164288,053
Exports of Goods (million USD) 280,321317,249335,909330,622347,193
Imports of Services (million USD) 52,40752,77156,18256,28937,306
Exports of Services (million USD) 41,44344,72149,83251,47540,992

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) 7.43.32.51.10.8
Volume of imports of goods and services (Annual % change) 8.94.14.13.23.2

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Taiwan is a member of the following international economic organisations: ICC, Asia-Pacific Economic Cooperation (APEC), WTO, International Trade Union Confederation (ITUC), among others. For the full list of economic and other international organisations in which participates Taiwan click here. International organisation membership of Taiwan is also outlined here.
Free Trade Agreements
The complete and up-to-date list of Free Trade Agreements signed by Taiwan can be consulted here.
 
 

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Political Outline

Current Political Leaders
President: Tsai Ing-Wen (since 20 May 2016 - reelected 11 Jan 2020) - PDP
Prime Minister: Su Tseng-chang (since 14 January 2019) - PDP
Next Election Dates
Presidential: January 2024
Legislative Yuan (parliamentary): January 2024
Current Political Context
Pro-independent candidate Tsai Ing-wen won a second term with a landslide victory in the January 2020 presidential election.
Main Political Parties
Most parties maintain alliances with the two largest ruling parties: the KMT and DPP. The most prominent political parties include:

- Kuomintang (KMT): centre-right, favours Chinese nationalism

- Democratic Progressive Party (DPP): centre, backs an independent Taiwan, has gained a significant number of parliamentary seats since 2012

- New Power Party: Centre-Left

- People First Party (PFP): liberal

- Green Party Taiwan: Centre-Left

- Minkuotang: Centre-right

- Labor Party : Far-Left

- New Party : Right-Wing

- For Public Good Party: Left-wing

- Social Democratic Party: Centre-Left

- Taiwan First Nations Party : Centre-Left

- Trees Party: Centre-Left, Environmentalist

Executive Power
First country in Asia to have elected its president by universal direct suffrage. The President and Vice President are elected on the same ticket by popular vote for four-year terms (eligible for a second term). The Premier is appointed by the President; the Vice premiers are appointed by the President on the recommendation of the Premier.
Legislative Power
Unicameral Legislative Yuan: 113 seats, 73 district members elected by popular vote, 34 at-large members elected on basis of proportion of island wide votes received by participating political parties, 6 elected by popular vote among aboriginal populations; to serve four-year terms
Parties must receive 5% of vote to qualify for at-large seats.
 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Taiwan please visit the Taiwan Center for Disease Control website.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To find out about the latest public health situation in Taiwan and the current sanitary measures in vigour, please visit the Taiwan Center for Disease Control website. Further info can be accessed on the dedicated page on the website of the American Institute in Taiwan.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the up-to-date information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the website of the Taiwanese Customs Administration and that of the Bureau of Foreign Trade.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Taiwan on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For the information on the economic recovery scheme put in place by the Taiwanese government to address the impact of the COVID-19 pandemic on the national economy, please visit the official page on the Special Act on COVID-19 Prevention, Relief and Restoration and the KPMG Taiwan page on Government and institution measures in response to COVID-19.
For a general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Taiwanese government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Taiwan in the IMF’s Policy Tracker platform.
Support plan for businesses
For the information on the local business support scheme established by the Taiwanese government to help small and medium-sized companies to deal with the economic impacts of the COVID-19 epidemic on their activity refer to the official page on the Special Act on COVID-19 Prevention, Relief and Restoration and KPMG's Taiwan page on Government and institution measures in response to COVID-19.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document. You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters
For the up-to-date information on possible support plans for exporters in Taiwan, if applicable, please consult the website of the Department of Trade and Industry's Bureau of Foreign Trade.
 

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