Macroeconomic Environment

The U.S.-China trade war continued to depress global demand in 2019 and adversely affect some Taiwanese companies, but it also benefited Taiwan through trade diversion effects and private sector expansion of production capacity, resulting in stronger-than-expected growth in exports and fixed investment. Those trends, along with a strong showing by the stock market and public policies targeted at boosting domestic demand, fueled moderate private consumption growth, helping Taiwan’s economy improve quarter by quarter and post the highest growth of any of the four Asian Tigers.

Taiwan’s financial sector also exhibited strong growth in 2019 despite ongoing global trade disputes and the U.S. Federal Reserve’s preventive interest rate cuts. In the year ahead, the risks of a global economic slowdown and uncertainty in financial markets could weaken private consumption growth. But the trade diversion effects triggered by the U.S.-China trade war should still provide a boost to Taiwan’s electronics exporters and prompt companies to increase their production capacities in Taiwan. Also, increased investment from overseas Taiwanese companies and in wind power and the deployment of 5G could spur sustained fixed investment growth. This strength in exports and private sector investment should offset consumption weakness and enable Taiwan to maintain stable economic growth in 2020.