Economics (AS & A Level) · Oct / Nov 2023 · Paper 21 · Question 1

Economic growth in Taiwan In 2021, Taiwan’s economy is forecast to grow at its fastest rate in seven years, encouraged by increasing global demand for its technology products. Gross domestic product (GDP) is expected to rise by 4.6% in 2021. Exports from Taiwan’s electronics industry include gaming devices, laptops, devices that aid cloud computing and semiconductors for car production. Taiwan is able to take advantage of a global shortage of semiconductors and it is estimated that exports will grow by 9.6% in 2021, the strongest export growth since 2017. A Taiwanese company is the world’s largest producer of semiconductors, and it plans to increase its capital investment by as much as US$28 billion in 2021 to help meet the shortage of semiconductors. Consumption expenditure in Taiwan is also expected to grow by 3.7% in 2021 which would be the fastest rate of growth in 17 years. It is significant that the expected growth in GDP in 2021 is higher than the expected rate of increase in the consumer price index (CPI), as is shown in Table 1.1. Table 1.1 Selected economic data for Taiwan, 2021 Previous forecast (November 2020) Latest forecast (February 2021) Nominal GDP growth (% per year) 3.8 4.6 CPI increase (% per year) 1.2 1.3 Export sales growth (% per year) 4.6 9.6 Trade balance (US$ billion) 57.8 63.9 The growth in the demand for Taiwan’s exports has contributed to an appreciation of more than 7% in the Taiwan dollar against the US dollar during 2020. Taiwan had a trade surplus of US$58.8 billion in 2020 and this is expected to rise to US$63.9 billion in 2021. This increase is likely to appreciate the value of the Taiwan dollar further. Sources: Adapted from: Forbes magazine, 22 February 2021 and: Bloomberg, 20 February 2021

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