To download a copy please click Taiwan 2016 Q4 Economic Report

Taiwan’s economy gains momentum as it registers healthy growth of 2.58% in Q4, the highest level for two years. Key drivers were increasing consumption, investment and a growing trade surplus.

Preliminary official estimates are that the Taiwanese economy grew by 1.4% overall in 2016, higher than the 1% growth predicted earlier in the year. The official GDP forecast for 2017 has been revised up to 1.87%, given positive indicators both domestically and in Taiwan’s key export markets.

Taiwan’s goods exports registered double-digit growth of 11.7% (yoy) this quarter, semiconductors exports grew by 28.1%, leading overall exports of ICT products to increase by 21.9%. Q4 investments in semiconductor equipments and transportation offer further signs of encouragement for these traditionally strong sectors of the economy.


Macro Economy
1. According to preliminary official statistics released on 25 January, Taiwan’s Q4 GDP growth was 2.58%
year-on-year (yoy), the highest since 2015 Q1, up from 2.03% in Q2.

2. Robust growth in Q4 pushed up the annualised growth for 2016 to 1.40%, as GDP reached a level of US$ 528.9 billion.

3. The Directorate of General of Budgets, Accounting and Statistics (DGBAS) attributed the growth to consumption and increased investment – particularly in the semiconductor and transport sectors – which respectively contributed 0.70% and 1.70% to GDP. Taiwan’s exports and imports also grew by 8.16% and 9.43% respectively in Q4, leading to a trade surplus which contributed 0.37% (yoy) to the GDP growth.

4. The latest 2017 annual growth estimates by international analysts, think tanks, officials and banks have been revised up to 1.7% –2.0%. (DGBAS: 1.87%; CIER: 1.73%; TIER:1.74%; Yuanta-Polaris: 1.8%; Academia Sinica: 1.68%; IMF: 1.7%; Standard and Poor’s:2.0%; Global Insight: 1.7%).

5. Most key economic indicators provide reasons for modest optimism about Taiwan’s economic growth prospects in the coming months. The Purchasing Managers Index (PMI) was 55.9% in December,
indicating that manufacturing industries are expanding. The Consumer Price Index (CPI) increased by 1.70% (yoy) in December, meaning that the annual rate of inflation in 2016 was 1.40% – well within the government’s 2% inflation target. The Central Bank kept its base interest rate at 1.375% in December.

6. The unemployment rate was 3.79% in December, averaging down the annualised unemployment rate to 3.92%. Unemployment remained well within the government’s 4% target, as it has done for the last three years. Labour force reached 7.48 million in November. Wages increased by 0.5% in the three months to November to an average of £1,302 (NT$48,887) per month.

Sector Performance
7. Accounting for 29% of GDP, the largest sector of Taiwan’s economy – manufacturing – performed strongly again in Q4 with 6.1% growth (yoy). The transportation and storage sector also grew by 8.6%, reflecting actual business activities rather than increments or financial adjustments.

8. The performance of other important sectors of the economy saw: wholesale and retail grow by 4.1%; electricity consumption rise by 2.5%; though the construction sector declined by 2.0%. For the first time in 15 months, financial services fell by 1.0% (yoy); this was not entirely unexpected when compared to Q4 2015 which saw strong growth of 7.2%. Overall, however, the sector grew by 1.99% in 2016.

9. Separately, annual figures showed that inbound tourists to Taiwan grew by 2.4% and reached the historical high at 10.7 million. This was in spite of a significant drop of 16.67% (yoy) in the number of Chinese tourists as visitors from the mainland fell from 4.2 million in 2015 to 3.5 million in 2016.

Trade Performance
10. Following Q3’s moderate recovery (+0.1%), Taiwan’s goods exports registered doubledigit growth of 11.7% (yoy) in Q4. Significant contributions came from semiconductors exports (grew by 28.1%) which led overall exports of ICT products up by 21.9%.

11. Almost all export sectors grew extensively: machine tools and parts by 15.2%; plastic products by 12.6%; optical products by 12.4%; and mineral and petrochemical products by 9.6%.

12. The main destinations for Taiwan’s exports in Q4 were: mainland China (incl. Hong Kong) with 42.5%, ASEAN (excl. Cambodia, Myanmar, Laos and Brunei1) with 18.2%, the US with 11.5%, Europe with 8.6%, and Japan with 6.6%.

Taiwan Political Economy
13. New British Representative Catherine Nettleton had an introductory meeting with President Tsai Ing-Wen
on 24 January. They discussed the UK-Taiwan trade and investment relationship and the potential for
Taiwan to collaborate with the UK on a number of sectors that are key for its industrial development plans. Tsai agreed that the UK could be as a useful partner as Taiwan sought to diversify its economic partnerships and thought that working together to foster innovation would be of mutual benefit.

14. On 3 February 2017, Premier Lin Chuan announced the first cabinet reshuffle by the Democratic Progressive Party administration since it took power in May 2016. Minister of Labour was replaced by incumbent Minister without Portfolio Lin Mei-Chu (林美珠). Other changes saw Chen Shih-Chung (陳時中) become Minister of Health and Welfare and Yilan County Magistrate Lin Tsung-hsien (林聰賢) appointed as the new Chairman of the Council of Agriculture. Former Deputy Minister of Education Chen Liang-Gee (陳良基) took up a new role as the Minister of Science and Technology.

15. On 27 January 2017, the European Commission concluded a decision to impose antidumping measures on two steel products – stainless steel tube and pipe butt-welding fittings – from China and Taiwan. Taiwanese exports on these products now faced to the anti-dumping duties ranging from 5.1% to 12.1% (N.B. Chinese exports would face 30.7%-64.9% duties). Another anti-dumping case against China and Taiwan for their stainless steel cold rolled flat products is still under investigation by the European Commission.

Taiwan Corporate Update
16. Taiwanese innovation was in the spotlights at the 50th Consumer Electronics Show (CES 2017) in Las Vegas in January with new products in robotics, augmented reality and virtual reality attracting particular attention.

17. Taiwan’s publically sponsored Industrial Technology Research Institute (ITRI) presented their personalised robot chess player at CES 2017. Analysts assess that the robot’s cutting-edge “intelligent vision system” means that it can act with greater precision than many of its peers.


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

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