BY HENRY LAN AND LINDA YANG
Business Sentiment Up Despite Uncertainty
The Directorate-General of Budget, Accounting and Statistics (DGBAS) said Taiwan’s 2023 GDP growth could surpass the 2.45% recorded in 2022, in part due to several economic stimulus measures planned for this year. A NT$6,000 (about US$200) cash handout to all citizens and some residents of foreign nationality [see below for more details] is predicted to raise the GDP growth rate by 0.3 points, while other measures to help renters and stabilize inflation would also contribute to growth.
DGBAS expects consumer spending to be the main driver of Taiwan’s economic growth in 2023 as exports and private investment face a global economic slowdown. To temper inflation and stabilize domestic financial markets, the Central Bank on March 23 raised interest rates by 12.5 basis points. Taiwan’s consumer price index (CPI) has increased by more than 2% over the last 19 months.
Taiwan’s February export orders decreased 17.1% year-on-year (YoY) to US$31 billion, the sixth consecutive monthly decline, according to the Ministry of Finance. The trade surplus for the first two months of 2023 declined by 56.2% YoY to US$4.69 billion.
Despite those decreases, business sentiment in the manufacturing sector improved in February for the fourth consecutive month, according to the Taiwan Institute of Economic Research (TIER). In February the think tank’s composite index gauging business sentiment in the manufacturing sector rose 3.12 points from a month earlier to reach 91.19. Gordon Sun, director of TIER’s Economic Forecasting Center, attributed the rise to China’s decision to ease Covid-19 controls, which pushed up global demand and encouraged enterprises to increase production.
However, Sun was less optimistic about the tech and semiconductor industries in particular, citing lingering uncertainty over the global economy. TIER also noted that Taiwan’s property market remains haunted by economic and political uncertainty ahead of the upcoming presidential election scheduled for January 2024 and amid ongoing rate hike cycles by the Central Bank.
Taiwan GNI Passes South Korea
Taiwan’s gross national income (GNI) per capita in 2022 passed South Korea’s for the first time in two decades, according to numbers released by the two governments. The shift was mainly attributed to differences in exchange rate policy and export performance. Bank of Korea data showed that South Korea’s GNI last year stood at US$32,661, down 7.7% from 2021 and US$904 lower than Taiwan’s reported US$33,565.
Analysts cited Taiwan’s strong economic performance during the pandemic and the lower depreciation of the Taiwan dollar against the US dollar compared to the South Korean won. Korean exports, including consumer electronics, face strong competition from China, whereas Taiwan produces advanced chips that dominate the global market.
Taiwan Fourth in Economic Freedom
Taiwan was ranked fourth in the Index of Economic Freedom 2023 report by think tank American Heritage Foundation, coming in behind Singapore, Switzerland, and Ireland. The index measures economic freedom based on 12 indicators across four categories, including rule of law, government size, regulatory efficiency, and open markets.
Taiwan’s average score increased by 0.6 points from the previous year to 80.7, with strong performances in judicial effectiveness, government spending, and trade freedom, but it performed relatively poorly in labor freedom and financial freedom.
The report said Taiwan displayed a “strong commitment to the rule of law and openness to global commerce” and had “benefited from a well-developed institutional framework, a tradition of private-sector entrepreneurial dynamism, and open-market policies that facilitate the free flow of goods and capital.”
U.S. Chip Delegation Visits Taiwan
The U.S. Department of Commerce sent officials in charge of chip development policy to Taiwan, Japan, and South Korea to encourage collaboration in the global semiconductor supply chain. A delegation arrived in Taiwan on March 29, marking the first visit to these countries by officials from the Department’s CHIPS Program Office since its establishment in September last year.
The U.S. government plans to inject US$52.7 billion into the American semiconductor industry through the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, with US$39 billion in subsidies for companies building new facilities and expanding production capacity in the U.S. The Department of Commerce will begin accepting applications in late June.
The department also announced National Security Guardrails, prohibiting subsidy recipients from investing in most semiconductor manufacturing in China, Russia, Iran, and North Korea for 10 years after receiving funding.
Food Delivery Still in Demand
Statistics from the Ministry of Economic Affairs (MOEA) reveal that demand for food delivery services remains high despite the easing of Covid-19 restrictions. According to MOEA’s survey of the wholesale, retail, and catering industries, the percentage of restaurants offering delivery rose during the pandemic, from 43.3% in April 2019 to a high of 67% in June 2021. The figure remained steady at 64.6% in May 2022, despite the resumption of in-person dining and the relaxation of pandemic restrictions.
The pandemic also accelerated digital transformation of the food and hospitality industry – the percentage of retailers using online ordering systems more than doubled from 16.2% in April 2019 to 34.8% in May 2022. Industry revenue rose to a new high of NT$865.3 billion in 2022 on the back of digital transformation and the resumption of in-person dining.
Airlines Expand Taiwan Services
Taiwan’s airline industry has responded to increasing demand for flights by purchasing new aircraft and opening new routes. EVA Air announced that it would purchase five Boeing 787-9 Dreamliners to be delivered between 2025 and 2027 to use on its North American and European routes for a combined price of US$1.8 billion.
China Airlines (CAL), Taiwan’s national flag carrier, announced two direct weekly flights to Prague, beginning July 18. The city will be CAL’s sixth destination in Europe, joining Amsterdam, Frankfurt, London, Rome, and Vienna.
Tigerair Taiwan, CAL’s low-cost carrier, announced direct flights to Phuket, Thailand, beginning May 10. Two flights a week will be offered.
In addition, Emirates announced the reintroduction of Airbus A380s on its Taipei-Dubai route, beginning August 1 in response to increased demand. The airline says a rebound in travel has led to a 31% increase in passengers on the route this year.
Hon Hai Announces India Investment
Hon Hai Precision Co. (Foxconn), the world’s largest contract electronics manufacturer, has announced plans to build an electronics production facility in Hyderabad, capital of the Indian state of Telangana. A delegation led by Chairperson Liu Young-wei recently visited India, where they met with the state’s chief minister, K. Chandrashekar Rao, who called Taiwan “a natural partner.” Though the size of the deal has not been disclosed, a report by Bloomberg said Hon Hai was investing US$700 million in a similar facility in neighboring Karnataka state.
The company already has facilities in Andhra Pradesh and Tamil Nadu states for the assembly of iPhone and Amazon devices. In 2022, Hon Hai announced a joint venture with Indian conglomerate Vedanta Group to produce 12-inch wafers using the 28-nanometer process. The factory is to begin production in 2025.