Taiwan’s economy is expected to continue its recovery in 2017 on the back of a pick-up in exports as the global economy improves. However, the upward trend is expected to remain gradual due to an uncertain international and domestic political environment.
According to the government’s Directorate-General of Budget, Accounting and Statistics, Taiwan’s economy got back on track in 2016 with an expansion of 1.4% after having posted gross domestic product growth rate of just 0.75% in 2015 — the lowest figure since the global financial crisis began in 2007. The government predicts GDP growth of 1.87% in 2017. Academia Sinica, Taiwan’s top research body, forecasts a slightly lower growth rate of 1.68% in 2017.
The government cites the remarkable rebound of the semiconductor market and rising commodity prices as the main contributors to the improvement in 2016 and expects increased demand for new technology would bring gains to Taiwan’s exporters. However, a rising consumer price index could weaken domestic demand: Academia Sinica estimated that private consumption grew 2.03% in 2016 but is forecasting just 1.3% growth this year.
The international situation, including the possibility of more protectionist trade policies by the United States and strained relations with China, add to Taiwan’s uncertainties. Taiwan’s overall tourist arrivals fell 4% in 2016. Almost 30% fewer visitors arrived from China, a decline that couldn’t be offset by a sharp 17.47% increase in the number of tourists from other nations.
Tourists are not the main worry about China: any escalation of tensions between Beijing and Washington, whether over trade or the South China Sea, could embroil Taiwan. “Besides the direct influence on exports of services brought by the sharp decline in Chinese tourists, industrial competition and diplomatic confrontation across the straits would further affect Taiwan’s economy and trade,” said Peng Su-ling, director of the Center for Economic Forecasting at the Chung-Hua Institution for Economic Research, a Taipei-based think tank.
Given these uncertainties, the administration of President Tsai Ing-wen has embarked on new policies to secure momentum for new development, including the New Southbound Policy focusing on enhancing business cooperation and exchange between Taiwan and 18 Asia-Pacific countries.
Another ambitious initiative is the Asia Silicon Valley Development Plan, which aims to promote innovation and research and development for devices and applications of the Internet of things, and to upgrade Taiwan’s startup and entrepreneurship ecosystem. Peng said such policies would not only affect economic growth performance in 2017, but also would decide Taiwan’s international competitiveness in the long term.
Liya Fan is a master’s degree candidate at the University of Hong Kong’s Journalism and Media Studies Centre.