Taiwan Economics in Brief – October 2021

GROWTH FORECASTS CONTINUE ASCENT

In September, Taiwan’s Central Bank (CBC) raised its forecast of Taiwan’s GDP growth for 2021 to 5.75%, a 0.5 percentage-point increase from its June figure of 5.25%. This follows the August forecast from the Directorate General of Budget, Accounting and Statistics (DGBAS) of 5.88% growth, up from the 5.46% it predicted in June.

The increasingly positive outlook regarding Taiwan’s economic performance this year is due to continued strong exports, as work-from-home trends sustain demand for Taiwanese tech products. Recent worldwide economic recovery is also expected to result in further growth. Between January and August this year, Taiwan saw a 22% increase in its trade surplus compared to the same period last year. 

Meanwhile, the food and beverage, retail, and services sectors have taken a significant hit from the pandemic, and domestic consumption is expected to continue to decline. DGBAS in August dropped its forecast of real private consumption to 1.36% from its June estimate of 2.75%. Moreover, the Taiwan Institute of Economic Research has cautioned that COVID-19 still poses a threat to growth in Taiwan and the region due to the spread of the Delta variant.

The CBC has maintained key interest rates for a sixth consecutive quarter, keeping the discount rate at an historic low of 1.125%. The bank’s decision not to tighten its monetary policy is drawn from concerns about the pandemic’s impact on domestic consumption.

The government also announced that Taiwan’s minimum wage would be raised next year. Minister of Economic Affairs Wang Mei-hua and National Development Council (NDC) Minister Kung Ming-hsin have signaled that the increase will be more generous than before, a response to this year’s better-than-expected economic growth. The minimum wage is currently NT$160 per hour, slightly higher than last year’s NT$158. Government officials will determine the extent of the wage hike in early October.

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