Economic Overview

In 2020-2021, Taiwan bucked global trends by maintaining stable macroeconomic performance amid the Covid-19 pandemic: economic growth surged from an average of 2.8% yearly in 2016-2018 to 4.5% in 2019-2021, propelled by increased manufacturing production and exports, along with supportive monetary and fiscal policies, alongside rising investment rates. After growing an estimated 1.3% in 2023, economic activity accelerated to 4.3% in 2024, the highest rate in three years, driven by stronger-than-expected private investment and a surge in high-tech exports (official governmental figures). According to the IMF, growth is anticipated to moderate to 2.7% this year and 2.6% in 2026, as robust exports of AI-related products and investment activities are expected to sustain growth, balancing weak demand in traditional manufacturing industries.

Taiwan maintains a solid external financial position, characterized by significant current account surpluses averaging between 10% and 15% of GDP over the past decade. After recording a budget deficit of 0.8% of GDP in 2024, the 2025 Budget is notably ambitious, with a nearly 20% increase from the preceding year. Social welfare will be the largest expenditure, followed by education, science, and culture. Funding for five priority industries—semiconductors, AI, military, security, and next-gen communications—will rise by 40%. The budget is expected to be nearly balanced in 2025. However, geopolitical tensions could strain finances in the second half, with slower export growth and new fiscal measures to support the economy. Military spending, currently at 2.5% of GDP, should remain high. Public debt – at 26.4% in 2024, from 29.1% one year earlier - is set to decline further (to 22.2% by 2026), remaining low by global standards (IMF). Inflation decelerated from 2.5% in 2023 to 2.1% last year. By 2025, inflation is expected to fall below the Central Bank of the Republic of China's (CBC) 2% target.

Official governmental figures show that Taiwan's unemployment rate fell to 3.38% in 2024, the lowest since 2000, down 0.1 percentage points from 2023. By education level, the jobless rate was highest among university graduates at 4.52%, followed by high/junior high school graduates at 3.21% and vocational college graduates at 2.68%. By age, unemployment was highest among those aged 20-24 at 11.62%, driven by first-time jobseekers, followed by 15-19-year-olds at 8.58%, 25-29-year-olds at 5.87%, and 30-34-year-olds at 3.36%. Overall, the number of individuals in employment hit about 11.60 million in 2024. Taiwan’s GDP per capita (PPP) was estimated at USD 82,615 in 2024 by the IMF, one of the highest ratios globally.

Foreign Trade

Taiwan is very open to international trade, which has been the engine of its rapid growth during the past 40 years. According to data from the Ministry of Finance (MOF), the main exports in 2023 comprised parts of electronic products (41.3%, mostly semiconductors), information, communication, and audio-video products (19.3%), machinery (5.6%), and optical, precision instruments; clocks and watches; musical instruments (3.1%). In 2023, the electronic components industry, the backbone of Taiwan's exports, generated USD 178.71 billion in exports, marking a 10.7% decrease from the previous year. Outbound sales posted by semiconductor suppliers fell by 9.5% from a year earlier, amounting to USD 166.62 billion. Machinery and electrical equipment accounted for the bulk of imports (44.7%), followed by mineral products (17.6%), chemicals (8.1%), and base metals and articles of base metal (6.5%).

In 2023, China and Hong Kong retained their position as the largest buyers of Taiwan's goods, purchasing USD 152.25 billion worth, reflecting an 18.1% decrease from the previous year. According to the Ministry of Finance (MOF), exports to China and Hong Kong constituted 35.2% of Taiwan's total outbound sales in 2023, down from 38.8% in 2022, while the U.S. accounted for 17.6% and Europe for 9.8%. 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 separatists and reunificationists in Taiwan made reaching policy consensus difficult. The United States' commercial battle against China has increased risk in Asian economies. The lack of international recognition from other countries also complicates Taiwan's international position.

Data compiled by the Ministry of Finance revealed that, in 2024, Taiwan recorded its second-highest annual exports, totalling USD 475 billion, marking a 9.9% increase from the previous year. Eight out of the eleven product categories saw growth, with exports of information, communication, and video/audio products leading the way, rising by 59% year-on-year to a record high of USD 132.5 billion. China and Hong Kong accounted for 31.7% of Taiwan's exports, followed by the United States at 23.4%, and ASEAN countries at 18.5%. Meanwhile, Taiwan reported imports of USD 394.47 billion in 2024, posting a trade surplus of USD 80.61 billion.