4 Results, Refine search

Taiwan is a very open economy, which enjoys a solid industrial export base and an exceptionally strong external financial position. Its average real GDP growth slowed to 2.8% per year in 2011-2019 from 5.6% in 2003-2007, but dynamics have reversed since 2020. Covid shock was well managed; real GDP grew by 3.1% in 2020, and neither external nor public accounts deteriorated. Instead, Taiwan took advantage of the surge in global demand for tech products. Moreover, its medium-term economic prospects have improved in the last few years thanks to an steady increase in investment, the government’s measures aimed at improving the island’s competitiveness and solid export prospects. Taiwan could benefit from the relocation of some production units away from mainland China to the island, as Taiwanese enterprises – strongly encouraged by the authorities – are changing their output strategy in response to the US tariff hikes on Chinese imports and rising labour costs in China.

Tensions with mainland China have worsened since the election of President Tsai Ing-wen of the Democratic Progressive Party (DPP), in 2016. President Tsai was re-elected in January 2020 and the DPP has maintained a majority in Parliament. Difficult relations with the mainland are leading to Taiwan’s diplomatic isolation, hampering its relations with other countries and representing a permanent downside risk on its economic prospects and stability.