(Bloomberg) — Taiwan’s economy grew at the fastest pace in 11 years in 2021, with growth set to get another bump this year from an unprecedented spending spree by its largest company.
Gross domestic product grew 6.3% last year, the government’s statistics office said in a statement Thursday, beating the 6% estimate in a Bloomberg survey of economists. That was the fastest rate of expansion since the 10.3% rebound in 2010 after the global financial crisis.
The better-than-forecast full-year result was fueled by a 4.9% expansion in the fourth-quarter, itself ahead of the 3.9% median economist estimate.
Advertisement
Article content
Officials said strong exports were the main reason fourth-quarter data beat initial forecasts.
“Robust external demand, our strong industrial position and the U.S-China technology dispute have meant some businesses with facilities overseas have moved production back to Taiwan,” Wu Pei-hsuan, a senior official at the Cabinet’s statistics department, said at a briefing after Thursday’s release. “With semiconductor plants adopting advanced processes and the roll-out of the government’s green-energy policy, this has increased investment across the board.”
The outlook for growth in 2022 remains bullish after Taiwan Semiconductor Manufacturing Co. revealed plans earlier this month to spend between $40 billion and $44 billion over the coming 12 months on new plants to help ease the shortage of semiconductors. That’s equivalent to around 5% of Taiwan’s $760 billion economy. And while a portion of TSMC’s capital expenditure will go overseas, the majority will be spent at home to expand factories making its highly sought-after semiconductors.
Advertisement
Article content
“Taiwan’s domestic investment revival story has been the key growth driver in 2021,” Angela Hsieh, an economist at Barclays Bank in Singapore, said via message Thursday. “TSMC certainly has been a key player in this, but other tech companies have also scaled up their investment plans aggressively in 2021. The positive spill-over effect has boosted Taiwan’s growth in 2021, and we think the virtuous cycle will continue into 2022.”
Monetary Policy
Taiwan’s investment-driven growth and surging fuel prices have led to inflation rising above the central bank’s 2% comfort zone since the second half of last year, triggering louder calls for policy makers to raise the benchmark rate from a record-low 1.125%.
One unidentified member of the central bank’s board said the authority should consider its first rate hike since 2011 at its next meeting if the pressure from inflation remains too high, according to minutes from the bank’s December meeting released Thursday.
Advertisement
Article content
The bank’s next board meeting is scheduled for mid-March.
GDP growth was predominantly fueled by a stellar year for Taiwan’s exporters. Global demand for semiconductors and other electronic products surged, driven by rebounding consumer spending as most countries eased their coronavirus lockdowns through the year.
Corporate revenues reflected this, with the combined annual sales of companies on the Taiwan Stock Exchange rising 15% to a record high NT$38.2 trillion ($1.4 trillion), according to a statement from the bourse. The benchmark Taiex index reached multiple record highs throughout the year and the Taiwan dollar strengthened to a new 24-year high.
For 2022, the main risk for the economy is whether the government adopts strict new measures to stamp out a small-but-growing Covid-19 outbreak. Domestic consumption is forecast to have rebounded in the fourth quarter of 2021 after a partial lockdown in the middle of the year shut down entertainment venues and banned in-restaurant dining.
“We factor in a moderate growth recovery in private consumption, but omicron remains a risk factor to monitor, especially as the Taiwan government still pledged to follow a zero-case policy, and the public are generally more risk averse,” Hsieh said. “So any cases detected will have a bigger impact on mobility and face-to-face services.”
The government, for now, sees a healthy rebound, projecting domestic consumption will rise 5.36% this year.
WASHINGTON (AP) — The head of the International Monetary Fund said Thursday that the world economy has proven surprisingly resilient in the face of higher interest rates and the shock of war in Ukraine and Gaza, but “there is plenty to worry about,” including stubborn inflation and rising levels of government debt.
“ Inflation is down but not gone,” Kristalina Georgieva told reporters at the spring meeting of the IMF and its sister organization, the World Bank. In the United States, she said, “the flipside” of unexpectedly strong economic growth is that it ”taking longer than expected” to bring inflation down.
Georgieva also warned that government debts are growing around the world. Last year, they ticked up to 93% of global economic output — up from 84% in 2019 before the response to the COVID-19 pandemic pushed governments to spend more to provide healthcare and economic assistance. She urged countries to more efficiently collect taxes and spend public money. “In a world where the crises keep coming, countries must urgently build fiscal resilience to be prepared for the next shock,” she said.
On Tuesday, the IMF said it expects to the global economy to grow 3.2% this year, a modest upgrade from the forecast it made in January and unchanged from 2023. It also expects a third straight year of 3.2% growth in 2025.
ADVERTISEMENT
The world economy has proven unexpectedly sturdy, but it remains weak by historical standards: Global growth averaged 3.8% from 2000 to 2019.
One reason for sluggish global growth, Georgieva said, is disappointing improvement in productivity. She said that countries had not found ways to most efficiently match workers and technology and that years of low interest rates — that only ended after inflation picked up in 2021 — had allowed “firms that were not competitive to stay afloat.”
She also cited in many countries an aging “labor force that doesn’t bring the dynamism” needed for faster economic growth.
The United States has been an exception to the weak productivity gains over the past year. Compared to Europe, Georgieva said, America makes it easier for businesses to bring innovations to the marketplace and has lower energy costs.
She said countries could help their economies by slashing bureaucratic red tape and getting more women into the job market.
(Bloomberg) — Nigeria’s economy, which ranked as Africa’s largest in 2022, is set to slip to fourth place this year and Egypt, which held the top position in 2023, is projected to fall to second behind South Africa after a series of currency devaluations, International Monetary Fund forecasts show.
The IMF’s World Economic Outlook estimates Nigeria’s gross domestic product at $253 billion based on current prices this year, lagging energy-rich Algeria at $267 billion, Egypt at $348 billion and South Africa at $373 billion.
Africa’s most industrialized nation will remain the continent’s largest economy until Egypt reclaims the mantle in 2027, while Nigeria is expected to remain in fourth place for years to come, the data released this week shows.
Nigeria and Egypt’s fortunes have dimmed as they deal with high inflation and a plunge in their currencies.
Bola Tinubu has announced significant policy reforms since he became Nigeria’s president at the end of May 2023, including allowing the currency to float more freely, scrapping costly energy and gasoline subsidies and taking steps to address dollar shortages. Despite a recent rebound, the naira is still 50% weaker against the greenback than what it was prior to him taking office after two currency devaluations.
Read More: Why Nigeria’s Currency Rebounded and What It Means: QuickTake
Egypt, one of the emerging world’s most-indebted countries and the IMF’s second-biggest borrower after Argentina, has also allowed its currency to float, triggering an almost 40% plunge in the pound’s value against the dollar last month to attract investment.
The IMF had been calling for a flexible currency regime for many months and the multilateral lender rewarded Egypt’s government by almost tripling the size of a loan program first approved in 2022 to $8 billion. This was a catalyst for a further influx of around $14 billion in financial support from the European Union and the World Bank.
Read More: Egypt Avoided an Economic Meltdown. What Next?: QuickTake
Unlike Nigeria’s naira and Egypt’s pound, the value of South Africa’s rand has long been set in the financial markets and it has lost about 4% of its value against the dollar this year. Its economy is expected to benefit from improvements to its energy supply and plans to tackle logistic bottlenecks.
Algeria, an OPEC+ member has been benefiting from high oil and gas prices caused first by Russia’s invasion of Ukraine and now tensions in the Middle East. It stepped in to ease some of Europe’s gas woes after Russia curtailed supplies amid its war in Ukraine.
Climate inaction will depress the world’s economy more than previously estimated, according to a new study that takes into account the impacts of weather extremes and variability such as temperature spikes and intense rainfall.
A scenario in which global temperatures rise 3C on average will reduce the world’s gross domestic product by about 10%, doctoral researcher Paul Waidelich of ETH Zurich and colleagues write, with less developed countries paying the worst toll. By comparison, limiting global warming by 2050 to 1.5C — as sought by the Paris Agreement — will reduce that impact by about two-thirds.
