Q3 2017 ECONOMIC REPORT
TAIWAN ECONOMY: 2017 Q3 UPDATE
To download a copy please click here: Taiwan 2017 Q3 Economic Report
Taiwan’s economy picked up speed in the third quarter of 2017 as increasing consumption and robust global demand, particularly for Taiwan’s semiconductor and consumer electronic exports, saw Taiwan’s economy register GDP growth of 3.1% (yoy). Taiwan’s exports grew by 17.49% in Q3, leading to a trade surplus that contributed 3.82% (yoy) to GDP growth. This was the best quarterly export performance registered in the last six years. Official estimates for growth in 2017 and 2018 were revised upwards to 2.58% and to 2.29% respectively.
UK-Taiwan bilateral trade rose modestly to £5.35bn last year. In 2016, Taiwan was UK’s 33rd largest trading partner and 7th largest in Asia Pacific1. The UK was Taiwan’s 16th largest trading partner globally and its 3rd largest trading partner in Europe, after Germany and the Netherlands, in 2016. UK exports to Taiwan rose by 11% to £1.98bn in 2016.
On 1 December 2017, the 20th round of UK-Taiwan trade talks were held in London. Both sides agreed to set up two new sector dialogues on trade in agriculture and energy and also signed an agreement to make it easier for specialist medicines to be used in Taiwan.
1. According to statistics released by Directorate-General of Budget, Accountings and Statistics (DGBAS), Taiwan’s Q3 GDP growth was 3.1% year-on-year (yoy). Meanwhile, the economic growth rate for 2017 Q1 and Q2 have been revised to 2.64% and 2.28% (formerly 2.66% and 2.13%).
2. Growth was attributed to consumption and exports – particularly mobile phone components – which caused the manufacturing sector to grow by 4.47% (yoy), contributing 1.45% to this quarter’s GDP growth. Taiwan’s exports and imports also grew by 17.49% and 11.41% respectively in Q3, leading to a trade surplus contributing 3.82% (yoy) to GDP growth – the best quarterly export trade performance over the past six years. The service sector grew by 2.61% (yoy) in Q3 after the expansion of 1.48% growth in the previous quarter.
3. The latest 2017 annual growth estimates for Taiwan by international analysts, think tanks, officials and banks have generally been slightly raised. (DGBAS: 2.11%→2.58%; CIER: 2.14%→2.18%; TIER: 2.08%→2.50; Yuanta-Polaris: 2.1%→2.25%; Cathay Bank: 2.1%; DBS Bank: 2.4%; Global Insight: 2.2%→2.5%).
4. Most key economic indicators provide reasons for modest optimism about the prospects for Taiwan’s economy over the coming months. The Inflation was -0.32% (yoy) in October as typhoons did not disrupt the food supply as in Q3 2016. In November, the Central Bank decided to keep the base interest rate at 1.375%. This level has been maintained since July 2016. Please refer to ANNEX A for more economic indicators of other countries.
5. The unemployment rate in September was 3.77%, down from 3.89% in August. This was the lowest rate in the past two years. In Q3, the number of employees on payrolls reached 7.6 million while the labour force reached 11.37 million. The average monthly earnings were NT$ 46,368 (£1,169.4). Both the number of jobs and monthly wages saw a small quarterly increase.
6. In September, the Ministry of Economic Affairs (MOEA) reported that that industrial production grew for the 17th consecutive month and recorded a monthly record high. With the steady export orders for advanced semiconductor products and strong demand for LCD panels, the manufacturing sector continued to drive Taiwan’s economy forward. According to the MOEA, the export value of Taiwan’s LCD panel (HS9013) in the first 3 quarters of 2017 was US$ 6.08 billion (£4.63 billion), making Taiwan the third largest LCD panel exporting economy globally.
7. DBS Bank raised Taiwan’s yearly GDP growth in 2017 and 2018 to 2.4% and 2.5% mainly because of greater anticipated demand for the new iPhone8 and iPhoneX models, which Taiwan’s Apple supply chain (e.g. Foxconn, Largan and Foxconn) is set to benefit from.
8. The performance of the services sector was also encouraging: transportation and storage grew by 6.01%; wholesale and retail trade grew by 4.46%; and the finance and insurance sector saw 5.15% growth in Q3.
9. Taiwan’s top five main goods exports in the first nine months of the year were: electrical machinery and equipment (44.1%); machinery including computers (11.4%); plastics and plastic articles (6.4%); optical, technical, medical apparatus (5.2%); and mineral fuels including oil (3.6%). Each of them grew by 14% to 20.8% on yoy basis.
10. In Q3, the goods exports saw a 17.5% expansion, in value terms, thanks to the global economy recovery and the effect of seasonal sales. September’s exports reached US$ 28.9 billion (£22 billion) in value, which is a monthly record high. September exports saw growth in the following sectors: machinery (53.1%); steel (34.2%); plastics and plastic articles (33.5%); mineral fuel (24.5%); optical products (23.6%); and electrical machinery and equipment (20.2%).
11. The main destinations for Taiwan’s exports in the first three quarters were: Mainland China (incl. Hong Kong) with 40.2%; ASEAN with 18.7%; the US with 11.8%; Europe with 9.3%; and Japan with 6.7%. So far in 2017, the value of exports to ASEAN has grown by 18.4% (yoy).
UK Taiwan Trade
12. According to the UK Office for National Statistics annual trade update, known as the Pink Book, UK-Taiwan bilateral trade rose modestly to £5.35bn in 2016. Taiwan is UK’s 33rd largest trading partner and 7th largest in Asia Pacific. According to the official Taiwanese statistics in 2016, the UK was Taiwan’s 16th largest trading partner globally and its 3rd largest trading partner in Europe, after Germany and the Netherlands. UK’s exports to Taiwan in 2016 totalled £1.98bn – up from £1.78bn in 2015 – a rise of 11% (yoy) overall.
13. In terms of trade in services, the UK’s exports to Taiwan rose from £599 million in 2015 to £777 million in 2016. Taiwan’s services exports to the UK were £332 million in 2015 but fell to £182 million in 2016. UK services exports to Taiwan have grown by 59.8% between 2012 (£486 million) and 2016 (£777 million). Please refer to ANNEX B for a detailed breakdown of the UK’s main exports to Taiwan.
14. UK’s exports of goods to Taiwan were £1.185bn in 2015 and £1.23bn in 2016, whilst Taiwan exported £3.188bn worth of goods to the UK in both 2015 and 2016. UK goods exports to Taiwan have grown by 6.67% between 2012 (£1.153bn) and 2016 (£1.23bn).
15. On 1 December 2017, the 20th round of UK-Taiwan trade talks were held in London. The talks were chaired by UK International Trade Minister Greg Hands and Taiwanese Vice Minister for Economic Affairs, Wang Mei-Hua. The talks came on the same day that Taiwan’s China Airlines’ new London to Taipei flight begins, re-establishing a direct route between the UK and Taiwan for the first time in five years. At the talks, both sides agreed to set up sector dialogues on trade in agriculture and energy and signed a commitment which makes it easier for British and Taiwanese pharmaceutical and biotech companies to protect their IP.
Taiwan Political Economy
16. On 9 November, the Taiwan’s Executive Yuan announced an amendment to the Labour Standards Act which would: relax a rule that requires two days off every week; reinstate a previous overtime rate; raise the cap on total overtime hours from 46 to 54 in a three-month period; and reduce the minimum rest time between shifts from 11 hours to 8 hours. The draft amendment is expected to pass in this legislative session. Industry has generally been supportive of the amendment which provides great flexibility in terms of workforce planning while unions have expressed some concern about worsening working conditions.
17. In August, the Ministry of Science and Technology announced that it would invest NT$4 billion (US$132 million) to help develop AI applications. In total, the government has allocated NT$16 billion (US$529 million) over the next five years to develop an “AI innovation ecosystem” in Taiwan, according to an August press release from the Executive Yuan. Projects slated for completion by year-end include the launch of an AI innovative research centre as well as AI Robot Maker Space facilities.
Mr Meng-Zhou WU
Senior Economic Officer
British Office Taipei
Tel: +886 2 8758 2051