The nation’s GDP rose 3.7 percent annually in the third quarter of this year, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said on Friday. The agency forecast that the economy would expand 4.15 percent this quarter from a year earlier after growing 6.8 percent in the first three quarters. It also upgraded its growth forecast for the whole of this year to 6.09 percent, up 0.21 percentage points from its August projection.
The economy has continued to benefit from the trade diversion and investment repatriation effects of China-US trade tension, coupled with growing semiconductor, transportation, manufacturing equipment and green energy investments in light of steady market demand. While exports rose 14.31 percent last quarter, moderating from a 22.51 percent increase in the second quarter, gross capital formation surged 31.69 percent, following growth of 12.6 percent the previous quarter, DGBAS data showed.
The substantial growth in gross capital formation has a profound effect on Taiwan, as investments made today might drive production and exports tomorrow. The nation’s exceptional export performance over the past two years reflects the effects of continuous domestic investment, which has supported production and employment at home.
The government’s three-year “Invest in Taiwan” initiative, started in 2019, has attracted 1,078 companies to return home or deepen their operations in Taiwan, with pledged investments of NT$1.49 trillion (US$53.5 billion) as of Friday, the InvesTaiwan Service Center of the Ministry of Economic Affairs said.
Last week, the ministry said it was in talks with the National Development Council over whether the government would extend the initiative, especially as some Taiwanese businesses are under growing pressure from China’s environmental and electricity restrictions, as well as Beijing’s economic coercion.
The tech sector’s performance helped propel the nation’s export growth in the third quarter due to strong external demand for semiconductors, electronic components and information-and-communications technology (ICT) products.
The latest customs data showed that exports of electronic components, including semiconductors, increased 26.9 percent year-on-year in the first 10 months of the year, while those of ICT products rose 25.8 percent over the same period. Together, they accounted for 52.1 percent of Taiwan’s total exports.
The non-tech sector has not diminished either, as it continues to benefit from a global economic recovery, rising business investment and infrastructure projects. Exports of base metals, plastics and rubber products, manufacturing equipment, chemical materials and textiles increased 43.8 percent, 44.2 percent, 28.5 percent, 41.9 percent and 20.4 percent respectively over the 10-month period from a year earlier.
Nonetheless, the share of non-tech goods in total exports has continued to slide in the past few years.
Whether the tech and non-tech sectors can sustain their momentum for an extended period is a bigger question, as global demand remains subject to possible COVID-19 outbreaks and rising inflation, which could eventually affect consumers’ purchasing power.
Taiwan remains dependent on China for its external trade. Last month, about 40.4 percent of Taiwan’s trade was with China.
It is in Taiwan’s interest to reduce exports to China in a meaningful way, while seeking to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and working to establish bilateral trade agreements with other countries to help non-tech businesses receive favorable tariff treatments.
Taiwan’s economy remains clouded by lingering trade tensions between China and the US.
However, it would be a positive change if the nation’s export structure develops in a more balanced direction in terms of tech and non-tech products, as well as in terms of its reliance on Chinese markets.
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