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Voters in Asia’s Brightest ‘Tiger’ Economy Face a Tricky Choice

Cindy Wang and Chinmei Sung
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Voters in Asia’s Brightest ‘Tiger’ Economy Face a Tricky Choice

(Bloomberg) -- Taiwan’s economic performance could act as a tiebreaker for undecided voters choosing a candidate in this weekend’s election, with the recent successes during President Tsai Ing-wen’s term offset by frustration at slower-than-expected progress in boosting the incomes of ordinary citizens.

While Tsai has overseen faster growth, a surge in investment and buoyant financial markets since she took office in 2016, there are concerns hidden under the rosy data. Here are four charts summarizing the outlook as she faces the challenge from Han Kuo-yu of the more China-friendly Kuomintang, and James Soong of People First Party this Saturday.

Taiwan has emerged as a surprise winner of the U.S.-China trade war, as the economy benefits from re-shoring of investment by companies previously embedded in China. Full year output growth for 2019 is set to come in at 2.5%, according to the median of economists’ estimates compiled by Bloomberg. That would mean Taiwan tops the four “Asian Tiger” economies for the first time since 2014.

The island’s income-per-person level remains a long-standing challenge. While Tsai has overseen the fastest income growth in 20 years, it is still the lowest of the four, which has fueled criticism of Tsai from her challenger Han Kuo-yu.

Taiwan’s income level is expected to have risen to $24,828 as of the end of 2019, lower than South Korea’s $31,431, Hong Kong’s $49,334, and Singapore’s $63,987, according to International Monetary Fund data. Taiwan’s income per capita has only grown 67% from end-2000 to 2019, compared with 93% for Hong Kong, 156% for South Korea, and 168% for Singapore over the same period.

While concrete proposals remain scarce, Han has promised to increase exports of agricultural products, boost tourists from China, and to establish free economic zones as part of his plan to bolster the economy.

Taiwan’s job market has been stable. The seasonally adjusted unemployment rate rose to 3.97% before President Tsai took office in 2016 and has trended lower afterward, reaching a record low of 3.69% twice. Its November reading was steady at 3.73%.

The lower jobless rate may be partly due to fewer job seekers in the market, as postwar baby-boomers are retiring and Taiwan grapples with an aging society. Taiwan may see a declining population as soon as 2022, according to an estimate from the island’s National Development Council. That’s three years earlier than its previous estimate.

Tsai’s most prominent achievement could be the policies to boost investment. Local firms have been encouraged to invest at home, as the U.S.-China trade war accelerates manufacturing relocation and helps Taiwan retake a slice of the global technology supply chain.

Over NT$700 billion of investment has been approved as of January 3 from the re-shoring program, according to government data.

Investment in place is estimated to reach NT$225.5 billion at end-2019, NT$213.3 billion in 2020, and NT$183.1 billion in 2021, according to estimates from Taiwan’s Ministry of Economic Affairs. It means investment momentum will continue this and next year, though lower than the peak in 2019.

Foreign firms such as Google parent Alphabet Inc. and wind power company Orsted A/S have also recently won government approval to invest in local projects.

“Taiwan’s economy has strengthened over the past year due to re-shoring investment amid the U.S.-China trade war and the recent recovery cycle of the semiconductor industry,” said Raymond Yeung, chief Greater China economist with Australia & New Zealand Banking Group Ltd. “But there are some structural problems remaining such as limited growth of wages, which leads to weaker consumption and makes it hard to transform into an economy driven by domestic needs.”

To contact the reporters on this story: Cindy Wang in Taipei at hwang61@bloomberg.net;Chinmei Sung in Taipei at csung4@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Samson Ellis

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