Taiwan: Economy records strongest growth since Q3 2014 in Q4
January 29, 2021
GDP growth picked up to 4.9% year-on-year in the final quarter of last year, from 3.9% in the third quarter. Q4's reading marked the strongest growth since Q3 2014. Over 2020 as a whole, the economy expanded 3.0%, making Taiwan one of the few economies to record growth last year thanks to a successful handling of the Covid-19 pandemic, which avoided the need for large-scale restrictions.
Private consumption fell 1.1% in Q4 compared to a 1.5% contraction in Q3, likely supported by a lower unemployment rate. Government consumption expanded 4.8% in Q4 (Q3: +3.4% yoy), as the fiscal stance remained supportive. However, total investment declined 1.4% (Q3: +0.8% yoy).
Exports of goods and services rose 5.7% in Q4 (Q3: +3.6% yoy), as Taiwanese exporters benefited from strong foreign demand for electronics. Meanwhile, imports of goods and services slid at a softer pace of 2.8% year-on-year in the final quarter (Q3: -3.3% yoy).
On a seasonally-adjusted quarter-on-quarter basis, economic growth waned to 1.9% in Q4 from the previous quarter's 3.9% expansion.
Looking ahead, our panelists see growth picking up pace this year on stronger activity abroad and the continuing robust performance of the electronics sector.
Commenting on the outlook, Iris Pang, chief greater China economist at ING, said:
“We expect that Taiwan will register even stronger growth in 2021, at 4.3%, after the reasonable performance of 2.98% in 2020. This will mostly be because of the higher export value of semiconductors stemming from an increase in both prices and volumes. But relying too much on a single growth engine is dangerous. A few years from now, when Mainland China starts to reach the cutting edge of technological innovation, Taiwan’s leading role in semiconductors could be at risk. Taiwan needs to compete on the speed of advancement to keep its number one place as a manufacturer of advanced chips. It is also in Taiwan’s interests to develop a supplementary growth source for the economy to provide some balance and to diversify risk.”
Author: Oliver Reynolds, Economist