Taiwanese economic growth potential unlikely to be robust in years ahead, says Wells Fargo

The Taiwanese economy expanded more than expectations in the first quarter of 2017 on a year-on-year basis. However, despite the positive print, the pace of growth reflects a modest deceleration from the fourth quarter and stays below the growth rates recorded in the 1990s and the first half of the 2000s. Subdued global economic growth in the last few years has impeded Taiwan’s economic growth and continues to be a possible headwind.

The economic growth is also challenged by a working-age population that is starting to contract as well as lacklustre production growth, which can partly be linked to low investment spending rates in the domestic economy, stated Wells Fargo in a research report.

According to the consensus, Taiwan’s real GDP is expected to grow 2 percent in 2017 and around 2.25 percent in 2018 and 2019. There are a few factors that would exert headwinds on the Taiwanese economy in the long run. The nation’s working-age population is beginning to shrink and productivity growth has decelerated sharply in recent years. Labor force growth and productivity growth are the two factors that greatly determine long-term economic growth. Thus, the economic growth potential in years ahead would not be as strong as it was in the last few decades, stated Wells Fargo.