Taiwan economy grows fastest since 2010 as TSMC gives boost

[TAIPEI] Taiwan's economy grew at the fastest pace in 11 years in 2021, with growth set to get another bump this year from an unprecedented spending spree by its largest company.

Gross domestic product (GDP) grew 6.3 per cent last year, the government's statistics office said in a statement on Thursday (Jan 27), beating the 6 per cent estimate in a Bloomberg survey of economists. That was the fastest rate of expansion since the 10.3 per cent rebound in 2010 after the global financial crisis.

The better-than-forecast full-year result was fuelled by a 4.9 per cent expansion in the fourth-quarter, itself ahead of the 3.9 per cent median economist estimate.

Officials said strong exports were the main reason fourth-quarter data beat initial forecasts. "Robust external demand, our strong industrial position and the US-China technology dispute have meant some businesses with facilities overseas have moved production back to Taiwan," Wu Pei-hsuan, a senior official at the Cabinet's statistics department, said at a briefing after Thursday's release. "With semiconductor plants adopting advanced processes and the roll-out of the government's green-energy policy, this has increased investment across the board."

The outlook for growth in 2022 remains bullish after Taiwan Semiconductor Manufacturing Co (TSMC) revealed plans earlier this month to spend US$40-44 billion over the coming 12 months on new plants to help ease the shortage of semiconductors. That is equivalent to around 5 per cent of Taiwan's US$760 billion economy. And while a portion of TSMC's capital expenditure will go overseas, the majority will be spent at home to expand factories making its highly sought-after semiconductors.

"Taiwan's domestic investment revival story has been the key growth driver in 2021," said Angela Hsieh, an economist at Barclays Bank in Singapore. "TSMC certainly has been a key player in this, but other tech companies have also scaled up their investment plans aggressively in 2021. The positive spill-over effect has boosted Taiwan's growth in 2021, and we think the virtuous cycle will continue into 2022."

GDP growth was predominantly fuelled by a stellar year for Taiwan's exporters. Global demand for semiconductors and other electronic products surged, driven by rebounding consumer spending as most countries eased their coronavirus lockdowns through the year.

For 2022, the main risk for the economy is whether the government adopts strict new measures to stamp out a small-but-growing Covid-19 outbreak. Domestic consumption is forecast to have rebounded in the fourth quarter of 2021 after a partial lockdown in the middle of the year shut down entertainment venues and banned in-restaurant dining.

"We factor in a moderate growth recovery in private consumption, but omicron remains a risk factor to monitor, especially as the Taiwan government still pledged to follow a zero-case policy, and the public are generally more risk averse," Hsieh said. "So any cases detected will have a bigger impact on mobility and face-to-face services."

The government, for now, sees a healthy rebound, projecting domestic consumption will rise 5.36 per cent this year. BLOOMBERG