Taiwan’s economy will probably grow at its fastest pace in seven years in 2021, the government said, forecasting that a global scramble for semiconductors will deliver a boost to the island’s exports.
Gross domestic product will likely expand 4.64% in 2021, the statistics bureau said Saturday, compared to a forecast of 3.83% made late last year. Officials also revised up fourth-quarter GDP expansion to 5.09%.
The government more than doubled its estimate for 2021 export growth to 9.58% from 4.59%.
While Taiwan’s projected growth for this year lags the global average of 5.4%, based on a Bloomberg survey of economists, it is coming off a higher base after having been one of the few significant economies to register an expansion last year.
The government pointed to increased demand for Taiwan’s semiconductors as a key reason it upgraded the 2021 forecasts. Given the leading position of the island’s main chip manufacturers, the strong external demand will boost exports, Tsai Yu-tai, director of the statistics department of the Directorate General of Budget Accounting and Statistics, said at a briefing following the release of Saturday’s data.
“We upgraded our export outlook after taking January export data into consideration, plus the fact that Taiwanese businesses with facilities in China are investing more at home, and the changes in the global supply and demand,” Tsai said. “We expect this year’s export growth to be the strongest since 2017.”
Overseas demand has helped fuel an appreciation of more than 7% in the Taiwan dollar versus the greenback over the past 12 months. Officials also warned that exporters and policy makers should be prepared for further gains to come.
“Our trade surplus was $58.8 billion last year,” said statistics chief Chu Tzer-ming. “We expect it to be $63.9 billion this year. This might lead to pressure on the Taiwan dollar to appreciate. Everyone should watch out for this.”
U.S. President Joe Biden’s top economic adviser, Brian Deese, earlier this week sought the Taiwanese government’s help in resolving the chip shortage that’s hindering U.S. automotive manufacturing. His appeal followed earlier pleas from Japanese and European officials for Taiwan’s help in ensuring supply. The world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co., plans to increase capital expenditure this year to as much as $28 billion to help address the shortage.
Taiwan’s economic outlook has also been bolstered by its largely successful handling of the Covid-19 pandemic. The island has registered just nine deaths and fewer than 1,000 cases since the beginning of the outbreak.
This allowed it to avoid the strict lockdowns that brought many other economies to a halt. With a few exceptions, Taiwanese businesses, offices and schools stayed open throughout the year, and there was a boom in domestic travel as people opted to vacation at home rather than head overseas.
However, Taiwan has so far struggled to secure enough vaccines to inoculate its more than 23 million people. Health officials say vaccinations will likely only start in June, leaving the island facing the possibility of being left behind as business and travel elsewhere bounce back from the pandemic.