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Taiwan’s economy in the last quarter of 2022 unexpectedly contracted owing to a drop in exports and a slowing global tech demand. Preliminary data from the statistics agency showed that Taiwan‘s annual gross domestic product (GDP) contracted 0.86% compared to a year earlier. This marks a steep decline compared to the 4.01% growth in Q3 and is Taiwan’s worst growth figure since the global financial crisis.
Looking at the full year, the economy expanded by 2.43% according to the preliminary figures. Taiwan will publish the revised GDP figures in a few weeks, along with a 2023 forecast. The latest full-year 2023 outlook sees growth at 2.75%. In 2021 the economy of Taiwan grew by 6.53%.
As per the Directorate General of Budget, Accounting and Statistics, “external demand has weakened significantly” and the “deterioration of the pandemic in mainland China is interfering with consumption and production activities.” China, Taiwan’s largest trading partner, missed its growth target of 5.5% last year, registering only 3%.
Taiwan’s exports continuously dropped for four straight months. According to figures published by the Ministry of Finance, exports dropped 12.1% by value in December from last year to $35.75 bn. This is the lowest level in 20 months.
The finance ministry warned that exports may continue to decline in the first quarter of this year.
Upbeat look for semiconductor exports?
Taiwan is a major hub in the global technology supply chain and thus depends on global demand which has been slowing due to inflationary pressures and interest rate rises around the globe.
Especially the sales of semiconductors have driven exports for Taiwan in recent years, with TSMC, the world’s largest contract chipmaker, the key player. The chipmaker in its latest analyst call warned that revenue for the first quarter of this year could drop by 5%.
However, there are first signs of a recovery for the industry. “We start to observe some initial signs of demand stabilization, and we will watch closely for more signals. We forecast the semiconductor cycle to bottom sometime in the first half and see a healthy recovery in the second half 2023,” said TSMC’s CEO C.C. Wei.
