Taiwan’s economy showed signs of a modest rebound in the final quarter of 2024, with the Directorate-General of Budget, Accounting and Statistics (DGBAS) projecting GDP growth of 1.8% year-on-year (YoY). This recovery follows contractions earlier in the year and was fueled by sustained government stimulus, steady private consumption, and Taiwan’s strategic expansion into non-semiconductor sectors such as green technology and electric vehicles.
However, exports have continued to struggle. In December 2024, exports contracted by 6.3% YoY, marking the 12th consecutive month of decline, according to the Ministry of Finance. Weak demand from major markets like the United States and Europe, coupled with inventory adjustments in the tech sector, have dampened Taiwan’s export performance. While semiconductor exports remain a cornerstone of the economy, revenue growth has plateaued due to sluggish demand for consumer electronics.
Conversely, Taiwan’s push into renewable energy has yielded positive results. Exports of solar panels and wind energy components grew by 12% YoY, propelled by global energy transition efforts.
Imports also fell by 5.1% YoY in December, reflecting subdued industrial demand and declining raw material prices. However, there was a notable increase in imports of capital goods to support domestic green energy initiatives, alongside reduced energy imports as global oil prices stabilized. As a result, Taiwan’s trade surplus narrowed to US$4.3 billion in December, down from US$5.1 billion a year earlier.
Private consumption was a bright spot in December, rising 3.5% YoY. Increased retail and e-commerce activity during the holiday season, combined with government programs to reduce energy bills and promote electric vehicle purchases, supported this growth. In more positive news, the unemployment rate fell to 3.38% in 2024, the lowest annual level in 24 years, according to DGBAS.
Inflationary pressures have eased, with the Consumer Price Index (CPI) rising 1.7% YoY in December, down from 2.1% in November. The decline was driven by falling food prices due to improved agricultural output and the stabilization of global energy prices, DGBAS said. For January, inflation is projected to remain subdued at around 1.6%, reflecting stable supply chains and tempered demand.
Fixed investment grew by 2.8% YoY in December, led by ongoing capital inflows from major players like TSMC, continued investment in offshore wind and solar energy projects, and government-led infrastructure initiatives aimed at enhancing transportation and digital connectivity.
Stormy waters in 2025
Looking ahead, Taiwan’s GDP is projected to grow by 3.1% in 2025, driven by reviving demand for electronic products and the continued expansion of high-speed computing and artificial intelligence applications, according to a December statement from Academia Sinica. The Chung-Hua Institution for Economic Research in January provided a slightly more bullish prediction of 3.22%.
Despite initial optimistic projections, Taiwan’s consumer confidence index (CCI) fell to its lowest level in eight months in January, amid growing concerns over global economic uncertainties tied to U.S. President Donald Trump’s return to the White House. National Central University reported that the CCI dropped 2.07 points from the previous month to 72.54 – the lowest since May 2024, when it stood at 72.20. The index measures consumer sentiment on prices, economic climate, stock market performance, durable goods purchases, employment prospects, and family finances over the next six months.
In response to announcements of increased tariffs by the new U.S. administration on imports from Canada, Mexico, and China, Taiwan’s Ministry of Economic Affairs (MOEA) announced measures to support affected Taiwanese companies. The ministry pledged assistance to companies with operations in Mexico, including Hon Hai Precision Industry Co. (also known as Foxconn), to shift production lines and adjust investments as needed to mitigate the impact of higher tariffs.
Last year, Foxconn announced plans to build the world’s largest assembly site for servers powered by Nvidia’s GB200 chips in Mexico. Other Taiwanese partners of Nvidia, including Inventec, also operate manufacturing plants in Mexico. Following the U.S. tariff announcement, Foxconn shares fell 9.2% in Taipei, while Inventec shares dropped 8.5%.
The MOEA also plans to establish an investment and trade service center in the United States to help Taiwanese companies assess investment opportunities across various states, devise supply chain relocation strategies, and connect with local partners.
Closer to home, Taiwan’s Legislative Yuan approved the 2025 central government budget on January 21, following extensive political debates and significant amendments. The final budget was set at approximately NT$2.92 trillion (US$89.15 billion), reflecting a 6.6% reduction from the original proposal submitted by the Executive Yuan in August 2024.
The opposition parties, primarily the Kuomintang (KMT) and the Taiwan People’s Party (TPP), led the budget cuts, citing concerns over excessive spending. Key areas affected include national defense, with a freeze on half of the NT$2 billion funding allocated for Taiwan’s indigenous defense submarine program, and a NT$100 billion reduction in funding for the state-owned Taiwan Power Co. (Taipower).
Premier Cho Jung-tai criticized the cuts, warning that they could have severe impact on essential government functions, including national security and public services. He described the reductions as “indiscriminate attacks” that might force some agencies to curtail or cease operations due to limited resources for basic utilities.
In response to the approved budget, the Executive Yuan is considering administrative remedies, including potentially requesting the Legislative Yuan to reconsider the budget to address the significant cuts imposed.
