Taiwan belongs to a group called the Four Asian Tigers, along with South Korea, Singapore, and Hong Kong. These regions experienced rapid industrialisation and high economic growth rates between the 1960s and the 1990s. Later, they have developed into high-income economies.
In 2020, Taiwan was the only Asian Tiger that reported positive gross domestic product (GDP) growth at 3.1%, ranking first in the Asia Pacific region. According to preliminary figures, Taiwan’s GDP grew 6.3% in 2021. The government has upgraded its 2022 GDP growth forecast to 4.42%, on back of stable demand for exports and increasing global demand for the island’s technology products.
Taiwan currently ranks 22nd globally in terms of nominal GDP and in purchasing power parity.
Taiwan GDP Annual Growth Rate (in %)
The country has a total population of approximately 23.6 million. Taiwan was able to keep its unemployment rate at virtually the same level despite the pandemic. Unemployment slightly increased from 3.7% in 2018 and 2019 to 3.9% in 2020. The rate is projected to remain at 3.8% in 2021.
Taiwan Unemployment Rate (in %)
Taiwan’s economy has positioned itself as the world’s fourth-largest producer of electronics and the largest supplier of semiconductors.
Taiwan has also benefited from strengthening in local consumption as well as domestic investment opportunities. Backed by its export-oriented and tech-reliant growth, experts suggest its economic outlook to stay resilient.
Currency and Central Bank
Taiwan’s official currency is the New Taiwan dollar or TWD, which is divided into ten dimes and 100 cents. Although, cents are almost never used in transactions. The TWD has been in circulation since 1949 after replacing the Old Taiwan dollar. The nation is also developing a central bank digital currency (CBDC) which is expected to debut in September 2022.
The Central Bank of the Republic of China (Taiwan) serves as central bank. In March, Governor Yang Chin-long announced that the central bank’s monetary policy will tighten this year, following the lead of other major economies.
Taiwanese core consumer price index increased 2.42% year over year in January 2022, the highest level since 2009. The government expects inflation to hit 1.93% this year, up from 1.61% previously.
Taiwan Inflation (in %)
Industry and Trade
While the country is known for its semiconductor and electronics industries, Taiwan’s economy is still dominated by the services industry. The services sector accounted for 60% of Taiwan’s GDP, employing about 60% of the labour force.
The service sector is characterised by a lack of competitiveness. Moreover, large labour-intensive industries have started relocating from Taiwan to other countries with less labour cost. On the other hand, its tourism industry is booming. In 2019, the country hit a record of 11.84 million foreign visitors. However, overseas travel in Taiwan was also impacted by the pandemic. In 2020, tourists brought only USD 1.8 billion into the country – eight times less than the previous year.
Taiwan’s manufacturing sector comprises more than 38% of the country’s GDP and provides jobs to 35% of the workforce. The country is one of the largest suppliers of semiconductors, computers, mobile phones, and computer screens in the world.
The agriculture sector only contributes about 1.5% of the GDP and employs around 5% of the labour force. Rice, sugar cane, fruits and vegetables are among the main crops produced in Taiwan.
Taiwan ranks 15th globally in total exports, with integrated circuits, office machine parts, computers, refined petroleum, and liquid crystal displays (LCDs) as its main export products. Its top export partners are China, the US, Hong Kong, Japan, and Singapore.
Taiwan Balance of Trade
On the other hand, the country is the 19th largest importer in the world and its top import products are integrated circuits, crude petroleum, photo lab equipment, petroleum gas, and refined petroleum. China, Japan, the US, South Korea, and Singapore are its main import partners.
Survey and Rankings
Taiwan has fallen from 13th to 15th place in the World Bank’s 2021 Ease of Doing Business Index but maintained its overall score of 80.9. It is currently ranked 4th among countries in the East Asia & Pacific region.
In the Heritage Foundation’s Index of Economic Freedom 2022, Taiwan’s economy takes the 6th place, scoring 80.1 points – up 1.5 points from its 2021 score. The country ranked 3rd among 39 nations from the Asia-Pacific region, making it into the top, “Free” Index category for the first time.
Stock Exchanges and Capital Markets
The Taiwan Stock Exchange Corporation or TWSE was established in 1961 and has operated as Taiwan’s sole stock exchange since 1962. Trading takes place on the exchange between 9 a.m. and 1:30 p.m.
The Taiwan Capitalization Weighted Stock Index (TAIEX), more commonly known as the Taiwan Weighted, is the exchange’s main stock index. It covers all listed companies on the TWSE, except preferred stocks, full-delivery stocks, and newly listed stocks.
Taiwan Semiconductor Manufacturing Company (TSMC), MediaTek, Foxconn, Chunghwa Telecom, and Formosa Petrochemical Corporation are the largest Taiwanese companies in terms of market capitalization.
Taiwan’s bond market has been described to have contradictory tendencies. Although the market is large in size, the volume of transactions is often small. The types of bonds available in Taiwan’s capital market are government bonds, corporate bonds and financial debentures, beneficiary securities and asset-backed securities, foreign bonds and sustainability bond.
So-called Formosa bonds have become an attractive funding choice for overseas issuers recently. These bonds are issued in Taiwan but denominated in currencies other than the New Taiwan dollar. There were 6,126 tranches of bonds issued by foreign firms as of August 2021.
Real Estate Market
Despite the pandemic, Taiwan’s housing market is thriving, with both demand and supply rising thanks to a strong economy and ultra-low loan rates.
Taiwan’s house prices increased for the twelfth straight quarter in Q3 2021, rising 6.95% from a year earlier, slightly higher than the previous year’s 6.73% gain. Meanwhile, housing transactions in Taiwan’s six major cities increased by 7.3% to 213,994 units in the first ten months of 2021, compared to the same period last year.
Home prices in Taiwan rose 15% in 2021 after a 7% growth in 2020.
Taiwan Housing Index (in %)
Source of charts: tradingeconomics.com