The Taiwanese economy accelerated to +1.5% in 2016, up from +0.7% in 2015. Activity was driven by a recovery of exports as demand for high tech products rose in the second half of 2016. Domestic demand picked up speed due to favorable fiscal policies such as government subsidies on car sales.
Going forward, the economy should accelerate gradually (+2.0% in 2017 and 2018). Yet it remains below potential (long-term average is 3.5%). Stronger global demand growth and proactive fiscal policies should support GDP growth. Private consumption acceleration will be limited due to poor wages growth and soft labor market conditions.
Yet, risks stem from tense political relations with Mainland China, a potential rise in US protectionist measures, and tighter global financing conditions. Insolvencies will continue to rise: +6% in 2017 after +25% in 2016.