Economic and Political Overview

flag Taiwan, China Taiwan, China: Economic and Political Overview

In this page: Economic Outline | Political Outline

 

Economic Outline

Economic Overview

In 2020-2021, Taiwan bucked global trends by maintaining stable macroeconomic performance amid the Covid-19 pandemic: economic growth surged from an average of 2.8% yearly in 2016-2018 to 4.5% in 2019-2021, propelled by increased manufacturing production and exports, along with supportive monetary and fiscal policies, alongside rising investment rates. After growing an estimated 1.3% in 2023, economic activity accelerated to 4.3% in 2024, the highest rate in three years, driven by stronger-than-expected private investment and a surge in high-tech exports (official governmental figures). According to the IMF, growth is anticipated to moderate to 2.7% this year and 2.6% in 2026, as robust exports of AI-related products and investment activities are expected to sustain growth, balancing weak demand in traditional manufacturing industries.

Taiwan maintains a solid external financial position, characterized by significant current account surpluses averaging between 10% and 15% of GDP over the past decade. After recording a budget deficit of 0.8% of GDP in 2024, the 2025 Budget is notably ambitious, with a nearly 20% increase from the preceding year. Social welfare will be the largest expenditure, followed by education, science, and culture. Funding for five priority industries—semiconductors, AI, military, security, and next-gen communications—will rise by 40%. The budget is expected to be nearly balanced in 2025. However, geopolitical tensions could strain finances in the second half, with slower export growth and new fiscal measures to support the economy. Military spending, currently at 2.5% of GDP, should remain high. Public debt – at 26.4% in 2024, from 29.1% one year earlier - is set to decline further (to 22.2% by 2026), remaining low by global standards (IMF). Inflation decelerated from 2.5% in 2023 to 2.1% last year. By 2025, inflation is expected to fall below the Central Bank of the Republic of China's (CBC) 2% target.

Official governmental figures show that Taiwan's unemployment rate fell to 3.38% in 2024, the lowest since 2000, down 0.1 percentage points from 2023. By education level, the jobless rate was highest among university graduates at 4.52%, followed by high/junior high school graduates at 3.21% and vocational college graduates at 2.68%. By age, unemployment was highest among those aged 20-24 at 11.62%, driven by first-time jobseekers, followed by 15-19-year-olds at 8.58%, 25-29-year-olds at 5.87%, and 30-34-year-olds at 3.36%. Overall, the number of individuals in employment hit about 11.60 million in 2024. Taiwan’s GDP per capita (PPP) was estimated at USD 82,615 in 2024 by the IMF, one of the highest ratios globally.

 
Main Indicators 2023 (E)2024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 755.67775.02814.44859.63902.08
GDP (Constant Prices, Annual % Change) 1.33.72.72.62.5
GDP per Capita (USD) 32,40433,23434,92436,86238,682
General Government Balance (in % of GDP) -2.3-0.8-0.8-0.9-1.0
General Government Gross Debt (in % of GDP) 29.126.424.222.220.5
Inflation Rate (%) 2.52.11.71.61.6
Unemployment Rate (% of the Labour Force) 3.73.73.73.73.7
Current Account (billions USD) 104.09114.46118.74134.46140.81
Current Account (in % of GDP) 13.814.814.615.615.6

Source: IMF – World Economic Outlook Database, Latest data available.

Note : (E) Estimated data

 

Main Sectors of Industry

The agriculture sector contributes only very modestly to the GDP (around 2% according to figures from the official statistical agency) and employs about 5% of the labour force in Taiwan. Taiwan's natural resources are limited, the main crops being rice (with an average production of 1.14 million tons in 2019-23), sugar cane, fruits and vegetables. Rice cultivation remains a fundamental component of Taiwan's agricultural landscape, alongside the production of fruits like bananas, pineapples, and citrus fruits, as well as vegetables such as leafy greens and root vegetables. Livestock farming, particularly pork and poultry, also contributes significantly to the sector.

The secondary sector accounts for almost 37% of GDP and employs about 35% of the labour force. The Taiwanese industrial sector encompasses a broad array of main sectors, including electronics, machinery, petrochemicals, and textiles. Renowned globally for its electronics industry, Taiwan is a leading producer of semiconductors, flat-panel displays, and consumer electronics. The machinery sector also plays a vital role, with Taiwan producing a diverse range of machinery and equipment for various industries. Petrochemicals form another cornerstone, with Taiwan hosting several petrochemical refineries and producing a wide range of chemical products. Additionally, the textile industry remains significant, with Taiwan known for its high-quality fabrics and garment manufacturing. Emerging sectors in Taiwan's industrial landscape include green energy technologies, biotechnology, and precision machinery, driven by innovation and government initiatives to foster advanced manufacturing capabilities. According to data from the Ministry of Economic Affairs (MOEA), in 2024, Taiwan saw its first growth in industrial production after two years of decline, driven by strong demand for artificial intelligence applications and high-performance computing devices. The industrial production index for the full year increased by 11.4% compared to the previous year.

Services account for over 62% of GDP and employ nearly 70% of the labour force. The Taiwanese services sector encompasses a diverse range of main sectors, including finance, tourism, healthcare, and information technology (IT). Taiwan's financial sector is robust, with a well-developed banking system and a growing emphasis on fintech innovation. Tourism is also a significant contributor to the economy. The healthcare sector is also notable, with Taiwan known for its high-quality medical services and growing medical tourism industry. Information technology services, including software development, digital content creation, and e-commerce, are rapidly expanding, driven by Taiwan's expertise in technology and innovation.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Value Added (in % of GDP) n/a n/a n/a
Value Added (Annual % Change) n/a n/a n/a

Source: World Bank, Latest data available.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
78,6/100
World Rank:
6
Regional Rank:
4

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
7.95/10
World Rank:
16/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Political Outline

Current Political Leaders
President: LAI Ching-te (since 19 May 2024)
Premier: CHO Jung-tai (President of the Executive Yuan) (since 20 May 2024)
Next Election Dates
Presidential: 2028
Legislative Yuan (parliamentary): January 2028
Current Political Context
On January 13, 2024, Taiwan held legislative elections alongside the presidential election. The run-up to the election garnered global attention due to escalating tensions in the Taiwan Strait. It was the fifth time the mixed electoral system was used for legislative elections. Lai and his Democratic Progressive Party (DPP) clinched victory in the election, securing slightly over 40% of the vote. The Kuomintang (KMT) candidate Hou Yu-ih came in second with 33.5%, while Taiwan People’s Party (TPP) candidate Ko Wen-je garnered 26.5%.
Legislative elections also took place on the same day. The ruling Democratic Progressive Party (DPP) lost its majority in the Legislative Yuan, which it had held since 2016, dropping 11 seats to retain 51. The Kuomintang (KMT) emerged as the largest single party with 52 seats, while the Taiwan People's Party (TPP) secured eight seats. The New Power Party lost its three seats as it failed to win a constituency seat or meet the 5% threshold for at-large representation. This election marked the first time, under the current electoral system introduced in 2008, that no party held an absolute majority in the Legislative Yuan. Additionally, it was the first time the largest party in the legislature had won neither the most constituency votes nor the most party votes. The DPP is currently the ruling party in Taiwan, leading a minority government that controls the presidency and the central government.
The key focus for Taiwan’s government revolves around the country's relationship with mainland China. The Kuomintang (KMT) criticized Tsai Ing-wen's Democratic Progressive Party, alleging that their advocacy for Taiwan's independence has exacerbated tensions. Taiwan's president, Lai Ching-te, had to confront his most challenging responsibility upon assuming office in May, contending with China's vehement opposition, branding him as a divisive separatist figure. Despite Lai's repeated assertions during the campaign about maintaining the status quo with China, which asserts Taiwan as its territory, in his prior statements to parliament Lai described himself as a "practical worker for Taiwan independence".
Main Political Parties
Most parties maintain alliances with the two largest ruling parties: the KMT and DPP. Only three political parties obtained seats in the Legislative Yuan following the 2024 election:

- Democratic Progressive Party (DPP): centre to centre-left, currently the ruling party in Taiwan, leading a minority government that controls the presidency and the central government
- Kuomintang (KMT): centre-right, advocates for Chinese nationalism and closer cross-strait relations
- Taiwan People's Party (TPP): centre-left, advocates for pragmatic governance and social reforms.

Other parties include:

- New Power Party (NPP): center-left, supports social progressivism and Taiwanese sovereignty
- Green Party Taiwan: center-left, focuses on environmental and social justice issues
- Taiwan Statebuilding Party: big-tent, strongly advocates for formal Taiwanese independence
- People First Party (PFP): liberal, previously allied with the KMT but has diminished political influence.

Type of State
Taiwan has for all practical purposes been independent for half a century but China considers it as a part of its territory and wants it re-united with the mainland. Legally, most nations and even the United Nations acknowledge the position of the Chinese government that Taiwan is a province of China.
Executive Power
Taiwan was the first country in East Asia to elect its president by universal direct suffrage, holding its first such election in 1996. The President and Vice President are elected on the same ticket by popular vote for four-year terms and are eligible for one re-election. The Premier is appointed by the President, while the Vice Premier is appointed by the Premier with the President's approval.
Legislative Power
Taiwan's Legislative Yuan is a unicameral body with 113 seats. These include 73 district members elected by popular vote, 34 at-large members allocated based on the proportion of island-wide votes received by participating political parties, and 6 members elected by popular vote from the indigenous population. All members serve four-year terms. Political parties must receive at least 5% of the vote to qualify for at-large seats.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
43/180
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
1/7
Civil Liberties:
1/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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Latest Update: March 2025