The Taiwan Economic Forecast 2021 summarizes key economic and social developments over the past year. It also presents findings on the evolution of policy reforms, external/global conditions, and financial-market dynamics from world-recognized financial institutions and multinational professional services authorities, assessing their implications for the country’s medium-term economic outlook.

Taiwan’s economy shows resilience amidst the impact of the global COVID-19 pandemic, with forecasted growth of 5.88% in 2021, its fastest pace in more than a decade. There is a 7.43% increase in the country’s real gross domestic product (GDP) during Q2 compared to last year. Taiwan’s top statistics agency attributed this upgraded outlook on strong export performance. As many countries made significant progress in the COVID-19 vaccination for their respective populations, this enabled less stringent movement restrictions which in turn drove global market demand and reopening of economies. Taiwan’s import and export trade continued to flourish due to a surge of contactless business activities and easy access to emerging technology applications.

According to the Directorate General of Budget, Accounting and Statistics (DGBAS), there is 8.92% real GDP growth rate in Q1 2021 due to rising, steady demand for information and communication products, 5G services, and electronics. “The annual economic growth rate would easily rise to break the 5 percent mark with the upward adjustment in Q1, if the 2nd, 3rd and 4th figures were all at the same level as those estimated in February,” DGBAS official Wu Pei-Shuan said. She further explained that aside from high foreign demand, there was also strong domestic consumption and investment “Overall, the economy continued a rising trend, pushed forward by robust growth in the second half of last year,” Wu said.

Real private consumption in Q1 2021 posted a 2.11% growth due to domestic tourism and constant peaks in the stock market. On the other hand, retail sales, catering sales, and sales from department store products decreased by 13.26%, 39.94%, and 60%, respectively. Private consumption growth in 2021 is forecasted to be 2.05%. “Demand for 5G and high-performance computing continues to increase, and orders for communications and electronic products are booming,” Wu added.

Real private investment growth for Q1 2021 is at 13.70% due to localization of supply chains and big tech companies’ decision to build new factories in and around Taiwan’s major cities. The impact of the epidemic, trade war, and base transfer enabled owners of semiconductor firms to pour investments in advanced process equipment and aviation. Likewise, 5G network construction is steadily rolling out while major maritime enterprises remain committed to equipment base expansion for the remaining half of the year. There is also a 29.16% increase in imports during Q1 and Q2 of 2021 driven by purchases of consumer goods and capital equipment as well as agricultural and industrial related products.

Taiwan’s exports industry is growing vigorously as there is a strong demand for remote equipment, home electronics, high-end chips, and emerging technology applications. Export orders, according to the Ministry of Economic Affairs, increased to 31.1% valued at $53.73 billion in June 2021 alone. The country also achieved a record high of $108 billion worth of quarterly exports. This is the first time it exceeded the $100 billion-mark, Ministry of Finance (MOF) reported.

Consumer price index (CPI) has an average increase of 1.47% which is attributed to rising costs of food, fuel, transportation, air travel, and international energy. Despite the uptrend, the central bank still maintains a relaxed stance on its monetary policy because the inflationary gauge is below the 2.0% ‘red line’. The steady demand for bulk raw materials, mineral products, and crude oil, on the other hand, also resulted to a 5.84% increase in the wholesale price index (WPI). According to Federal Reserve Chairman Jerome Powell, the high inflation readings are due to supply bottlenecks and consumer demand but will only last for several months.

Beating COVID-19 Again

Taiwan has been able to implement a ‘business as usual’ composure during the pandemic, keeping the virus at bay with its strict quarantine rules, tight borders, and excellent contract tracing. Even with the mid-May 2021 COVID-19 outbreak, the government managed to keep new cases fewer than 20 each day. Success in the suppression of the coronavirus transmission is due to the following:

• Timely establishment of the Central Epidemic Command Center (CECC) to oversee and implement a series of epidemic control measures
• Mask mandates for all citizens while outside their homes and in all public transportation
• Provision of government-paid quarantine facilities and hotels for anyone coming from abroad to significantly reduce cross-infection within families
• Coordination with Taiwanese businesses for contact tracing of customers and patrons through QR codes from smartphones
• Banning indoor dining and restricting indoor activities to prevent transmission via surfaces, droplets, and aerosols in poorly ventilated indoor spaces
• Demanding accountability from politicians to improve anti-pandemic efforts on the ground which is a marker for good governance
• Using media to provide round-the-clock information on fighting COVID-19 and to encourage citizens model appropriate behaviors regardless of their political leanings
• Donation of more than 50 million face masks around the world which in turn led to vaccine pledges from partner countries which is enough to inoculate almost 30% of its current population

Taiwan’s quick government response is key to minimizing the negative impacts of the coronavirus crisis to the society and the economy. As part of the COVID-19 relief measures, the government approve $35 billion (5.5% of 2019 GDP) to support service-sector family businesses, small enterprises, and low-wage earners. There was also provision of relief assistance programs for those belonging to the tourism industry, ensuring that employees will receive up to 40% of their regular wages.

The Tsai Administration’s Strategy

During the 2020 pandemic-triggered recession, Taiwan with all its productivity indicators proved that it is resilient enough to sustain its economic recovery by the end of 2021. While consumer expenditure and production were heavily disrupted during lockdowns, electronics demand especially from US and China has ensured strong economic growth. The global shift to remote work increased the sale of work from home devices and accelerated the pace of digital transformation around the country.

Taiwan President Tsai Ing-wen, during her 2021 inaugural address, highlighted the following strategies:

• To secure a central role in the global supply chain by utilizing the country’s strengths in industries such as information communications technology and semiconductor
• To further develop medical, biotech, and renewable energy technologies that would are crucial for connecting to the world market
• To ensure steady provision of critical medical supplies from strategic stockpile industries as a continued response to the COVID-19 crisis
• To advance trade and economic ties with Asian regional players in a post-pandemic era
• To become more deeply involved in vaccine development and in the fight against transnational diseases through participation in major international organizations

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