Taiwan's 2015 GDP Growth Falls Short of 1%

According to the Directorate-General of Budget, Accounting and Statistics (DGBAS) of Taiwan's Cabinet, the island's economy grew only 0.85 percent year on year in 2015, hitting a six-year low and failing to meet the modest growth goal of one percent that the government had tried to secure.

The Cabinet-level organization attributes the disappointing growth rate mostly to the island's weaker-than-expected exports and domestic consumption, which pulled down the island's year-on-year gross domestic product (GDP) growth for the final quarter to minus 0.28 percent.

The National Development Council, another Cabinet-level organization, has notified all ministries to discuss a proposal to extend a measure to boost domestic consumption for another three to four months in order to shore up Taiwan's GDP, according to Deputy Minister Kao Shien-quey.

According to the DGBAS, the negative final-quarter growth represents the second consecutive quarter of negative GDP growth in Taiwan. But it also represents a positive 0.97 growth when calculated on the basis of seasonally adjusted quarterly growth rate (SAQR) and a positive 3.22 percent growth based on the seasonally adjusted annualized rate (SAAR) as is widely adopted in the United States and other countries.

DGBAS officials point out that although the final-quarter result missed the projected 0.49 percent growth target, it declined less steeply than the negative 0.63 growth rate of the island's GDP in the previous quarter mostly thanks to the effect of the government's consumption boosting measures.

The officials say that the final-quarter result actually showed that the island's economy had returned to a healthier state, instead of a second consecutive yearly fall on the SAAR calculation basis. Taiwan's economy as a whole performed weakly in the second half of 2015 both in exports and domestic consumption, with widely reported declines in exports for many months in a row.

However, they say Taiwan's private-sector consumption also missed expectations in the fourth quarter of last year, but its year-on-year growth improved to 1.64 percent. Also in real terms of the island's capital formation, also known as net capital accumulation during an accounting period, such figure showed a negative 0.44 percent growth year on year in the fourth quarter, albeit a much better than projected minus 0.89 percent rate.

Although SAAR-based and SAQR-based final quarter results witnessed positive growth in the island's GDP, DGBAS officials point out that the recovery still lacks sustained momentum and it remains to be seen whether this wave of economic cycle has hit the bottom in the fourth quarter of last year.

The officials point out that Taiwan's economy is not likely to fall into recession judging from the island's job market, where average pay has hit record high while unemployment has hit record low.

However, such optimism has to be considered in the face of many examples of unreasonably high prices of products in Taiwan. With average hourly wages in Taiwan being a half or less relative to those in the U.S. and Canada, home prices in Taipei compared to similar urban centers in North America, for instance, are as high or higher; while a typical Starbucks coffee in Taipei is priced double that in Canadian cities. Relatively higher consumer prices in Taiwan work against private sector spending to undermine retail revenue and add to the potential of recession.    

Data compiled by DGBAS ranks Taiwan at the last place in 2015 GDP of the Four Asian Tigers, after South Korea's 2.6 percent and Singapore's 2.1 percent. Although Hong Kong has yet to announce its annual result, its economic growth should comfortably stand above 2 percent from the announced 2.5 percent average for the first three quarters.