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Economic and political overview

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 6.6% in 2021 (IMF, October 2022). Taiwan enjoys a good financial position, is the 4th electronic producer in the world and support R&D. It reached a growth of 3.3% in 2022. According to the latest IMF forecasts, growth is expected to slow down to 2.8% in 2023 and 2.1% in 2024, subject to the post-pandemic global economy recovery.

According to the latest IMF estimates, public debt closed at 28.4% of GDP in 2021 and 24.1% in 2022. It is expected to decrease in 2023 and 2024 to 22.1% and 20.2% respectively. The budget was in deficit at -1.9% of GDP in 2019 and increased due to the COVID-19 pandemic to -2.7% in 2020 before coming back to +0.7% in 2021 and +0,5% in 2022. It is expected to remain stable in the following years at +0,5% in 2023 and 2024. Inflation remained low at 2% in 2021 and 3,1% in 2022. It is forecasted to reach 2.2% in 2023 and 1.4% in 2024 (IMF, October 2022). 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.

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. In 2021 and 2022 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 4% in 2021, virtually unchanged compared to 2020 and 2019 (3.9% and 3.7% respectively) and decreased to 3.6% in 2022. It is expected to remain at this level in 2023 and 2024 (IMF, October 2022). Social challenges include an ageing population, low birth rates, and a tense political agenda focusing on reunification with mainland China.

Amid the global economic slowdown, the country's semiconductor sector is particularly exposed to the economic downturn, but slowing global demand could hit non-tech sectors even harder, particularly those related to commodity and consumer products (Taiwan ratings, 2023).
In 2023, the country’s most immediate challenge will be to navigate the volatile international context, facing steep challenges against a backdrop of the persistent health and economic overhang of a global pandemic and a war in Europe, a cost-of-living crisis caused by persistent and broadening inflation pressures, and the slowdown in China.

 
Main Indicators 202020212022 (E)2023 (E)2024 (E)
GDP (billions USD) 673.18775.74761.69790.73843.19
GDP (Constant Prices, Annual % Change) 3.46.52.52.12.6
GDP per Capita (USD) 28,57133,18632,64333,90836,157
General Government Balance (in % of GDP) -2.7-2.3-0.5-0.5-0.5
General Government Gross Debt (in % of GDP) 32.130.127.525.022.6
Inflation Rate (%) -0.22.02.91.91.7
Unemployment Rate (% of the Labour Force) 3.94.03.73.73.7
Current Account (billions USD) 95.55114.57101.7393.8495.26
Current Account (in % of GDP) 14.214.813.411.911.3

Source: IMF – World Economic Outlook Database , October 2021

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 2022 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 over 62% of GDP and employed nearly 70% of the labour force in 2022. 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 was waiting for the world's borders to open again to international travel.

Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook.  Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023, the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic. Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024 (International Monetary Fund - IMF, 2023). The impact of the 2022 world events appears to have affected both sides of most sectors and markets in this country for the third 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 70% of GDP in 2022 (Trading Economics, 2023). 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 3% in the volume of exports of goods and services of the country in 2023, after an increase of 0.8% in 2022, and an increase of 4.1% of its imports, after an increase of 2.4% in 2022.

Taiwan's economy is export-oriented 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 2021, and imported USD 287.1 billion of goods and USD 56.3 billion of services (WTO, 2023). Electronics industry is the largest industrial export sector and it receives the most US investment. Indeed, Taiwan logged a 52 Billion USD trade surplus in 2022 on strong exports of electronic product parts (Market Screeners, 2023). 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 20172018201920202021
Imports of Goods (million USD) 259,266286,333287,164288,053382,101
Exports of Goods (million USD) 317,249335,909330,622347,193447,693
Imports of Services (million USD) 52,77156,18256,28937,30639,562
Exports of Services (million USD) 44,72149,83251,47540,99252,036

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

Foreign Trade Forecasts 20222023 (e)2024 (e)2025 (e)2026 (e)
Volume of exports of goods and services (Annual % change) -0.27.41.00.80.6
Volume of imports of goods and services (Annual % change) 1.46.13.23.22.9

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.

The year 2022 has been a turbulent one for the Taiwan Strait as China increased military pressure on Taipei following US House Speaker Nancy Pelosi's visit in August.  The opposition Kuomintang retained control over a majority of Taiwan's cities and counties in the local elections held in November 2022, but this does not represent a warming in Taiwan's relations with China, nor a rebuke of the ruling Democratic Progressive Party. China will enhance its pressure on Taiwan in 2023, with its attitude deepening ahead of elections in January 2024.

Indeed, there are a number of unpredictable variables that will impact the situation in the Taiwan Strait in 2023. They include China's behavior in the Taiwan Strait, how issues related to Taiwan will be framed in the United States domestic politics and Taiwan's presidential election in early 2024, which typically focus on cross-Strait relations and Taiwan's relationship with the United States.
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 of 113 seats including 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 and 6 elected by popular vote among aboriginal populations; to serve four-year terms.
Political parties must receive 5% of vote to qualify for at-large seats.
 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For the general overview of the financial measures put in place in Taiwan in response to the pandemic, refer to the KPMG website Government and institution measures in response to COVID-19.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, 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.
 

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