Taiwan’s economy contracts for first time since 2016 as global demand for hi-tech exports cools

Gross domestic product declined 0.86 per cent in the October-to-December quarter from a year earlier, the first quarterly contraction in more than six years

Looking ahead, analysts see a bumpy first half of the year as key export markets the United States and Europe enter a ‘recessionary environment

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Taiwan’s economy grew 2.43 per cent last year, below the government forecast of 3.06 per cent. Photo: EPA-EFE

Published: 6:30pm, 18 Jan 2023

Taiwan’s economy contracted in the fourth quarter of 2022, rounding out its slowest full-year of growth since 2016 and reflecting waning global demand for its hi-tech products, ranging from iPhones to semiconductor chips.

Gross domestic product (GDP) declined 0.86 per cent in the October-to-December quarter from a year earlier, official data showed on Wednesday. It was the island’s first quarterly contraction since the January-March period in 2016 and the worst decline since a 1.13 per cent fall in the third quarter of 2009.

“Taiwan’s economy unexpectedly contracted in [quarter four], driven by a sharp fall in exports,” Capital Economics, a London research firm, said in a note.

Taiwan’s economy grew 2.43 per cent last year, below the government forecast of 3.06 per cent.

Mainland China, Europe and the United States are big buyers of Taiwanese exports, which are the mainstay of the economy.

But a surge in coronavirus infections in the mainland kept people indoors in December and away from shops and entertainment venues, despite a recent easing of economically damaging Covid-19 controls.

“In 2022, it was mainly the drag from China’s economic slowdown as exports to the mainland contracted even though exports to the US and EU were still positive for the full-year,” said Ho Woei Chen, an economist for global economics and markets research with UOB in Singapore.

Mainland factories that buy Taiwan’s exports for assembly and re-export were short of labour at times last year because workers left for their hometowns to avoid lockdowns, said Hu Jin-li, a professor with the Institute of Business and Management at National Yang Ming Chiao Tung University in Taipei.