Taiwan cuts 2023 growth outlook to lowest since financial crisis

TAIPEI - Taiwan cut its growth forecast for 2023 to the slowest pace since the global financial crisis, in a setback to the ruling Democratic Progressive Party ahead of January elections.

The economy will likely expand 1.42 per cent in 2023, the statistics bureau said in a statement on Nov 28. That would be the weakest annual growth since 2009, and compared with an August projection of 1.6 per cent. Gross domestic product is set to grow 3.35 per cent in 2024, up slightly from an earlier forecast of 3.32 per cent.

Taiwan’s economy is set to be a key issue in

the Jan 13 presidential election.

During the pandemic, growth exploded off the back of massive demand for goods produced by the trade-dependent island, including its booming semiconductor industry.

The ruling DPP may argue that it is still a safe pair of hands, given the trajectory, even with the recent slowdown – though the main reasons for weak GDP growth in 2023 have been a larger-than-expected decrease in exports and investment, according to the statistics bureau.

The rival Kuomintang and Taiwan People’s Party say they can boost business by improving fraught relations with China. They have also zeroed in on domestic concerns, including the high costs of housing and of raising children.

Consumer prices are set to increase 2.46 per cent in 2023 before easing off 1.64 per cent in 2024. The rising cost of staples such as eggs and cooking oil have hurt many Taiwanese, and the central bank earlier in November signalled that there may be further rate hikes after the October consumer price index jumped a higher-than-expected 3.05 per cent.

Looking forward, despite the revised GDP forecast for 2023, the economy is “making progress steadily”, said Taiwan’s statistics bureau chief statistician Chu Tzer-ming.

Consumer confidence has rebounded in November, according to a National Central University survey published by the Central News Agency on Nov 27. But the NCU said much of that came from gains in Taiwan stocks as foreign investors increased their holdings.

The economy’s growth driver “should gradually rotate from consumption to net trade again as the tech cycle has bottomed”, said Ms Michelle Lam, greater China economist at Societe Generale in Hong Kong. “Consumer spending may get less of a boost from the government’s stimulus.”

Vice-President Lai Ching-te is seeking to succeed President Tsai Ing-wen, who will step down due to term limits. President Tsai raised the minimum wage seven times, and is set to do so again in 2024, but critics say the increases have been insufficient to match the rises in property prices.

In late 2022, the DPP suffered major losses in regional elections in the worst showing since it was founded in 1986, thanks to rising disquiet over cost of living issues and an uptick in pandemic deaths. 

January’s election is much more likely to be centred around relations with China, with the DPP arguing it’s the only party able to stand up to Beijing, which claims Taiwan as its territory.

But the KMT’s Hou Yu-ih, mayor of New Taipei City, says he can improve relations without endangering Taiwan, building business links and other ties that would reduce the risk of misunderstanding between the two sides. 

The TPP’s Ko Wen-je says he would push for Taiwan to join regional economic organisations, and structure taxes to encourage companies to pay their employees better. BLOOMBERG