Taiwan’s economy ends 2020 on high note: Natixis

January 29, 2021

TAIPEI -- Approached by the peril of trade war and COVID-19, few expected Taiwan to maintain robust growth in 2020, but it has crossed the finishing line for 2020 with one of its best performances in recent years, and possibly within Asia, according to the global financial group, Natixis.

"On our side, we have been holding the view that global demand in high-tech products would clearly support Taiwan' external demand, and could cement its global position as a key provider of semiconductor down the road," Natixis says.

"Such rapid growth is not only due to strong external demand. Private consumption has remained strong with some Government support.

"In fact, Taiwan's Triple Stimulus Spending Vouchers helped revert consumption weakness in H1 2020, with a growth rate of 2.2% YoY in Q4 2020. More importantly, positive sentiment was supported by  containment of COVID-19, excellent performance in equities, and eased pressure on the labour market."

Industrial production further accelerated from 6% in Q3 2020 to 8% in Q4 2020, driven by solid demand for electronic parts and a rebound in commodity prices, such as chemicals and metals. Construction was also a key engine of growth, backed by expansion of factories and office space as well as high demand for residential property under lax liquidity conditions from the repatriation of funds.

Mortgage growth reached 8.4% YoY in November 2020, surpassing the peak in 2007. Land prices also accelerated, from 0.3% YoY in Q1 2020 to 1.2% YoY in Q3 2020, especially for industrial and residential use.

Natixis says: "Lifted by global demand for semiconductor and electrical equipment, Taiwan's exports grew 12% YoY in Q4 2020, the quickest pace since 2017.

"While export orders from the US and Mainland China remain strong, those to ASEAN and Europe have also rebounded. With the structural shift towards 5G, internet-of-things, data centres and auto chips, the relevance of Taiwan's exports to the world will only grow."

Within this, Natixis says,TSMC's increase in CAPEX seems to indicate that capacity is being created for Taiwan to increase its role as a key manufacturer and exporter of semiconductors. However, geopolitical risks remain high.

"In the same vein, the current rebound in chemical and materials may be fragile if the pandemic situation worsens, let alone transportation and serviced-related sectors."

Natixis expects Taiwan's economy to grow by 5.5% YoY in Q4 2020 and by 3.1% in 2020, which would be its best quarterly economic performance since 2011.

www.natixis.com (ATI).