To download a copy, please click here: Taiwan 2017 Q1 Economic Report

Taiwan’s economy maintained its momentum by registering growth of 2.60% in Q1, causing the annual growth forecast to be revised up to above 2.0%. Key drivers were increasing consumption, investment and a growing trade surplus –  particularly in the semiconductor and LCD panel sectors – leading manufacturing to grow by 6.70%.
Premier Lin Chuan announced the ‘Forward-Looking Infrastructure Plan’, aiming to boost the economy and focusing on rail, water, green energy, digital, and local counties’ infrastructure. A total budget of NT$ 882 billion (£23.7 billion) has been allocated but is pending the Legislative Yuan’s approval.

Macro Economy
1. According to official statistics released on 26 May, Taiwan’s Q1 GDP growth was 2.60% year-on-year (yoy), down from 2.79% in Q4 2016.
2. The Directorate General of Budgets, Accounting and Statistics (DGBAS) attributed the growth to consumption and increased investment – particularly in the semiconductor and LCD panel sectors – leading manufacturing to grow by 6.70% (yoy), contributing 1.91% to this quarter’s GDP growth. Taiwan’s exports and imports also grew by 7.36% and 7.67% respectively in Q1, leading to a trade surplus which contributed 0.69% (yoy) to the GDP growth.
3. The latest 2017 annual growth estimates by international analysts, think tanks, officials and banks have been revised up to above 2.0%. (DGBAS: 2.05%; CIER: 2.11%; TIER: 2.04%; Yuanta-Polaris: 2.1%; Cathay Bank: 2.1%; DBS Bank: 2.5%; Standard and Poor’s: 2.0%; Global Insight: 2.1%).
4. Most key economic indicators provide reasons for modest optimism about Taiwan’s economic growth prospects in the coming months. The Consumer Price Index (CPI) increased by 0.59% (yoy) in May – well within the government’s 2% inflation target. The Central Bank kept its base interest rate at 1.375% in December.
5. The unemployment rate was 3.67% in April, within the government’s 4% target as it has been for the last three years. The labour force reached 7.51 million in Q1. Wages increased by 0.6% in Q1 to an average of £1,416 (NT$44,144) per month.

Sector Performance 
6. Accounting for 29% of GDP, the largest sector of Taiwan’s economy – manufacturing – performed strongly again in Q1 with 6.7% growth (yoy). The transportation and storage sector also grew by 6.7%, reflecting actual business activity rather than increments or financial adjustments.
7. The performance of other important sectors of the economy saw: wholesale and retail grow by 3.6%; information and communication by 1.7%; and real estate by 1.7%. Official statistics further showed that financial services had 3.7% growth in Q1, and revised last year’s Q4 growth to 0.7% – making growth in the financial sector extended to six consecutive quarters.

Trade Performance
8. Following Q4’s recovery (+11.7%), Taiwan’s goods exports registered more double-digit growth of 15.1% (yoy) in Q1. Significant contributions came from the growth of semiconductor exports by 24.7%, which led overall exports of ICT products (which accounted for nearly 1/3 Taiwan’s total goods export) up by 19.3%.
9. Almost all export sectors grew extensively: metal products and parts by 22.1%; plastic products by 16.0%; optical products by 21.0%; and mineral and petrochemical products by 34.5%.
10. The main destinations for Taiwan’s exports in Q1 were: mainland China (incl. Hong Kong) with 40.0%, ASEAN (excl. Cambodia, Myanmar, Laos and Brunei) with 19.2%, the US with 11.3%, Europe with 9.3%, and Japan with 6.7%.

Taiwan Political Economy   
11. Premier Lin Chuan announced the biggest government project – dubbed the ‘ForwardLooking Infrastructure Plan’ on 24 March, prior to President Tsai’s one year anniversary in office. Lin Chaun said this project will boost GDP growth by an additional 0.7% over the coming years.
12. The ‘Plan’ aimed to incorporate all government-led infrastructure projects focusing on five sectors in the next 7 years: rail, water, green energy, digital, and local counties. A budget totalling NT$ 882 billion (£23.7 billion) had been allocated, which would break the government debt threshold. The Cabinet therefore proposed a special bill to the Legislative Yuan for approval of the extra spending.
13. Separately, the Cabinet approved a four-year plan on 1 June to promote wind power generation, in the hope of installing 4200 MW of wind power capacity by 2025.  The government will develop onshore wind farms and set up model wind farms in nearshore areas from 2017 to 2020, raising Taiwan’s total installed capacity to 1334 MW.  Premier Lin also pointed out that the wind power development plan is expected to create 10,000 jobs and to attract NT$613.5 billion (£15 billion) of investment.

Ta-Ching Shih Ph.D.
Senior Economic Officer
+ 886 2 8758 2051

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