Economic Outline

Economic Indicators

In 2020-2021, Taiwan bucked global trends by maintaining stable macroeconomic performance amid the Covid-19 pandemic: economic growth surged from an average of 2.8% yearly in 2016-2018 to 4.5% in 2019-2021, propelled by increased manufacturing production and exports, along with supportive monetary and fiscal policies, alongside rising investment rates. In 2023, however, the export-driven island nation experienced a slowdown due to sluggish global demand, with growth reaching only 0.8% supported by private consumption. The economy is anticipated to gradually rebound in 2024 (3%), on the back of external demand rather than domestic factors. The IMF outlook hinges on improvements in the global economy and the avoidance of escalation in geopolitical tensions with China.

Taiwan maintains a robust external financial position, characterized by significant current account surpluses averaging between 10% and 15% of GDP over the past decade. With foreign exchange reserves exceeding USD 565 billion as of June 2023—equivalent to more than 15 months of imports—the nation enjoys a strong buffer. Additionally, its moderate public debt (estimated at 26.6% of GDP in 2023, with an expected reduction to 23.3% this year) and minimal external debt signify low reliance on non-resident financing. The budget returned into positive territory in 2023 (+0.3% of GDP, from -1.7% one year earlier). The projected annual revenue for the 2024 central government general budget stands at TWD 2.709 billion, with annual expenditure set at TWD 2.881 billion. This marks a 5% increase in revenue and a 7.2% increase in expenditure compared to 2023. The budget is primarily allocated to three key sectors: social welfare, accounting for 27.5% of the total budget, national defence receiving 15%, and education, science, and culture allocated 19.5%. To counter escalating inflationary pressures in recent years, the central bank elevated its main policy rate from 1.125% in early 2022 to 1.875% by March 2023, marking the highest level since 2015. This resulted in a deceleration in the inflation rate to 2.5% last year, with a further decrease expected for 2024 (1.5%).

Due to substantial job growth in the services sector, the unemployment rate hit its lowest level in August 2023, matching figures not seen since January 2001, standing at 3.4% seasonally adjusted. The resilience of the job market, coupled with the planned minimum wage increase slated for January 2024 (+4.05% monthly and +3.9% hourly), will further bolster household spending. Despite maintaining a relatively moderate Gini coefficient compared to international standards, Taiwan has witnessed a concerning trend of increasing income inequality over the last three decades. Official data indicates that its Gini coefficient climbed from 0.291 in 1985 to 0.312 in 1991, and further to 0.342 by 2022.

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