Taiwan's high per capita GDP attributed to resilient economy, forex

10/16/2022 09:51 PM
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Taipei, Oct. 16 (CNA) A resilient domestic economy and the Taiwan government's support of the local semiconductor industry are factors that have contributed to the country's strong per capita gross domestic product (GDP), experts said Sunday.

Their analyses came in the wake of a projection by the International Monetary Fund (IMF), which said Taiwan's per capita GDP is expected to become the highest in East Asia this year, partly because of its relatively stable currency.

According to the IMF's latest report, Taiwan's per capita GDP is set to increase in 2022 from US$33,140 (NT$1.056 million) to around US$35,510, surpassing Japan's for the first time in history and South Korea's for the first time since 2003.

South Korea's 2022 per capita GDP is estimated to drop by an annual 4 percent to about US$33,590, while Japan's is projected to fall 12.6 percent to around US$34,360, the IMF report said.

Commenting on the report, the National Development Council (NDC) agreed that a relatively stable Taiwan dollar was a major factor, but it added that the country's solid economic resilience had also contributed to its strong per capital GDP.

Expressing similar views, Darson Chiu (邱達生), a research fellow at Taiwan Institute of Economic Research's (TIER) Department of International Affairs, said that in addition to the stable forex factor, Taiwan's successful economic transformation has also contributed to the high per capita GDP growth.

That transformation was achieved with the return of overseas Taiwanese businesses, which helped to expand production and increase investment in Taiwan, he said.

In comparison, Japan's per capita GDP fell below US$40,000 in 2020, after reaching that mark a year earlier, and it has continued to fall due to a sharp depreciation of the Japanese yen this year, the impact of the trade war between the United States and China, the COVID-19 pandemic, Chiu said.

South Korea's economy has also shown sluggish growth since 2019, due mainly to the U.S.-China trade war, he said.

According to Taiwan's central bank data, the Taiwan dollar has dropped 13.15 percent against the greenback so far this year, while the Korean currency has plunged 16.78 percent, and the Japanese yen has plummeted 21.95 percent.

Dachrahn Wu (吳大任), director of National Central University's Research Center for Taiwan Economic Development, said that the foundation for Taiwan's healthy per capita GDP growth this year had been laid over the past two years.

After the outbreak of the COVID-19 pandemic in 2020, Taiwan's successful management of the pandemic and the retention of normal operations in its high-tech sector lent support to domestic growth, despite the global slowdown, Wu added.

During that period, Taiwan's important role in the global semiconductor industry came under the spotlight, particularly during a global shortage of semiconductors last year, Wu said.

However, C.C. Wei (魏哲家), CEO of the world's largest contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), said at an investor conference last week that the chipmaking industry might see a slump in demand next year, and observers are concerned about how that will impact Taiwan's economy.

Liu Pei-chen (劉佩真), a researcher at TIER's Taiwan Industry Economics Database, said the semiconductor industry is facing three major challenges, the main one being its worst downward cycle in a decade, which will test the ability of businesses in the supply chain to adapt.

Meanwhile, the U.S. is expected to step up its restrictions on China, which will cripple the latter's semiconductor industry and may limit the operating flexibility of foreign suppliers, Liu said.

In addition, Taiwan chipmakers may come under mounting pressure to decentralize their production facilities, amid tensions across the Taiwan Strait, as many countries become increasingly aware of the importance of supply chain resilience, Liu added.

Taiwan had earned a name as one of the Four Asian Tigers, along with Hong Kong, Singapore and South Korea, based on its rapid economic growth from the 1960s to the 1990s.

In 1992, Taiwan's per capita GDP reached US$10,000, while South Korea's was US$8,000.

However, Taiwan's economy began to weaken later in the 1990s, as a large number of Taiwanese companies began moving their production operations to China due to wage hikes and soaring production costs in Taiwan.

South Korea also took a hit later in that decade, and it registered negative economic growth in 1997 during the Asian financial crisis. The government, however, introduced stimulus measures and reforms that spurred rapid economic growth in 1999 and 2000.

In 2003, Korea's per capita GDP surpassed Taiwan's, mainly on the back of the Korean manufacturing sector. At that time, Taiwan's economy was sluggish due to the exodus of Taiwanese businesses, according to Tsai Yu-tai (蔡鈺泰), the chief of the Department of Statistics under the Directorate-General of Budget, Accounting and Statistics.

(By Pan Tzu-yu and Evelyn Kao)

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