Economy overview
Healthy Economy
The global financial crisis has hit the world severely. Taiwan’s healthy economy makes it more worthy of long-term investment than other emerging countries. The banking system is abundant of liquid capital and the country has huge foreign exchange reserves, a current account surplus, and low foreign debt and average debt, which make the fundamental value of Taiwan’s economy stands out and the country resistible to the financial crisis. According to the statistics of the International Monetary Fund, Taiwan has more than USD3 trillion of foreign exchange reserves, which is ranked 4th in the world. The ratio of foreign debt to GDP is nearly 40% for South Korea and the Philippines, while ratio for Taiwan is lower than 25%. This indicates that Taiwan has a securer economy. The loan-deposit ratio for Taiwan banking system in 2007 is lower than 90%, compared to South Korea’s 130%; the deposit of Taiwan banking system is more abundant. The overseas creditor rights in 2007 reached USD466.6 billion, the 6th highest in the world. In 2007, the debit-service ratio (the ratio of repayments on foreign debt interest and principal to product and service export value) was only 2.72%. This also indicates that Taiwan’s ability to pay its foreign debts is good. Taiwan has large current account surpluses, which make the country resistible to the impact of capital outflow and help reduce the risk of confidence crisis. During the global economic recession, Taiwan can still work on preparing for the next wave of economic growth. Taiwan’s economy is healthier than other emerging countries. With improved cross-strait relations, Taiwan is expected to have new growth momentums after recovery from the recession.
Overview
Taiwan has a dynamic capitalist economy with gradually decreasing government guidance of investment and foreign trade. In keeping with this trend, some large, state-owned banks and industrial firms have been privatized. Exports, led by electronics and machinery, generate about 70% of Taiwan’s GDP growth, and have provided the primary impetus for economic development. This heavy dependence on exports exposes the economy to upturns and downturns in world demand. In 2009, Taiwan’s GDP contracted 1.9%, due primarily to a 20% year-on-year decline in exports. In 2010 GDP grew 10.5%, as exports returned to the level of previous years. Taiwan’s diplomatic isolation, low birth rate, and rapidly aging population are major long-term challenges. Free trade agreements have proliferated in East Asia over the past several years, but so far Taiwan has been excluded from this greater economic integration, largely because of its diplomatic status. Taiwan’s Total Fertility rate of just over one child per woman is among the lowest in the world, raising the prospect of future labor shortages, falling domestic demand, and declining tax revenues. Taiwan’s population is aging quickly, with the number of people over 65 accounting for 10.9% of the island’s total population as 2011. The island runs a large trade surplus, and its foreign reserves are the world’s fourth largest, behind China, Japan, and Russia. Since President MA Ying-jeou took office in May 2008, cross-Strait economic ties have increased significantly. Since 2005 China has overtaken the US to become Taiwan’s second-largest source of imports after Japan. China is also the island’s number one destination for foreign direct investment. Taiwan has focused much of its efforts on improving the cross-Strait economic relationship. Three financial memorandums of understanding, covering banking, securities, and insurance, took effect in mid-January 2010, opening the island to greater investments from the mainland’s financial firms and institutional investors, and providing new opportunities for Taiwan financial firms to operate in China. Taiwan and the mainland in June 2010 signed the landmark Economic Cooperation Framework Agreement (ECFA), an agreement that the Taiwan authorities hope will eventually lead to a free-trade arrangement that will increase cross-Strait economic ties by lowering tariffs on a number of goods and by reducing market access barriers for services. The Taiwan authorities have said that the ECFA will serve as a stepping stone toward trade pacts with other regional partners and they announced that formal negotiations towards an economic cooperation agreement with Singapore would begin in 2011. Closer economic links with the mainland brings greater opportunities for the Taiwan economy, but also poses new challenges. For example, FDI in China has resulted in Chinese import substitution away from Taiwan’s exports and a restriction of potential job creation in Taiwan.
Quicky:
GDP (purchasing power parity): $823.6 billion (2010 est.)
GDP (official exchange rate): $427 billion (2010 est.)
GDP – real growth rate: 10.5% (2010 est.)
GDP – per capita (PPP): $35,800 (2010 est.)
Labor force: 11.07 million (2010 est.)
Labor force – by occupation: agriculture: 5.2%, industry: 35.9%, services: 58.8% (2010 est.)
Unemployment rate: 5.2% (2010 est.)
Investment (gross fixed): 21.8% of GDP (2010 est.)
Budget: revenues: $72.24 billion, expenditures: $79.65 billion (2010 est.)
Public debt: 33.9% of GDP (2010 est.)
Inflation rate (consumer prices): 1% (2010 est.)
Agriculture – products: rice, vegetables, fruit, tea, flowers; pigs, poultry; fish
Industries: electronics, communications and information technology products, petroleum refining, armaments, chemicals, textiles, iron and steel, machinery, cement, food processing, vehicles, consumer products, pharmaceuticals
Exports: $274.6 billion (2010 est.)
Exports – commodities: electronics, flat panels, machinery; metals; textiles, plastics, chemicals; optical, photographic, measuring, and medical instruments
Exports – partners: China 28.1%, Hong Kong 13.8%, US 11.5%, Japan 6.6%, Singapore 4.4% (2010 est.)
Imports: $251.4 billion (2010 est.)
Imports – commodities: electronics, machinery, crude petroleum, precision instruments, organic chemicals, metals
Imports – partners: Japan 20.7%, China 14.2%, US 10%, South Korea 6.4%, Saudi Arabia 4.7% (2010 est.)
Source: CIA, BN
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