Taiwan central bank makes surprising interest rate hike
Mar. 21, 2024 20:19
Taiwan's stronger semiconductor sector, lower depreciation to dollar cited as reasons
Mar. 8, 2023 12:58
Taiwan News, Staff Writer
Taiwan and South Korea flags. (Freepik, DanaCS image)
TAIPEI (Taiwan News) — Taiwan's gross national income (GNI) per capita last year beat South Korea's for the first time in 20 years, due to greater relative depreciation of the South Korean won to the U.S. dollar and stronger performance by Taiwan's semiconductor industry.
South Korea's GNI per capita last year was US$32,661, representing a 7.7% decrease from 2021, according to the Bank of Korea. In 2022, the won suffered a 12.9% depreciation against the dollar, leading to a drop of 8.1% in South Korea's nominal gross domestic product (GDP) denominated in U.S. dollars.
However, the bank pointed out that on a won basis, South Korea's nominal GDP actually rose 3.8% over the previous year to 2,150.6 trillion won. In addition, its GNI on a won basis rose by 4.3% to 42.203 million won.
With a GNI per capita of US$33,565 in 2022, Taiwan exceeded South Korea's GNI by US$904. This marks the first time Taiwan has surpassed South Korea's per capita GNI since 2002.
Meanwhile, the New Taiwan dollar depreciated less against the U.S. dollar compared to the won at 6.8%.
Darson Chiu (邱達生), a research fellow at Taiwan Institute of Economic Research's (TIER) Department of International Affairs, outlined two main factors cited by CNA leading to Taiwan rising past South Korea. First, the won depreciated against the U.S. dollar more than the NT dollar.
The second factor, according to Chiu, is that during the pandemic, Taiwan's exports, particularly of semiconductors, increased amid the accelerated adoption of the digital economy. Meanwhile, South Korea's trade surplus turned into a trade deficit, dragging down its economic performance.
Chung-Hua Institution for Economic Research (CIER) Vice President Wang Jiann-chyuan (王健全) told CNA that Taiwan's economic growth rate has been strong over the past years. Wang said that the pandemic has driven telemedicine, online entertainment, and consumer electronics, while the U.S.-China technology war has driven semiconductor orders from Taiwan.
Wang said Taiwan is also leveraging its geographical location with its New Southbound Policy. He asserted that Taiwan's epidemic prevention measures have been effective while not negatively impacting Taiwan's manufacturers.
As to why South Korea's exports and economic performance have not been commensurate, Wang said that South Korea's semiconductor production is mainly designed for consumer electronics, while Taiwan's chips have a more diversified customer base. For example, Taiwan Semiconductor Manufacturing Company (TSMC) has a dominant market share of high-end semiconductors, while the demand for consumer electronics has declined, impacting South Korea more severely.
Wang said in recent years, South Korean firms have also faced increasing competition from Chinese rivals. In addition to semiconductors, South Korean companies face fierce competition from Chinese corporations in other industries such as consumer electronics, home appliances, and mobile phones, greatly hampering exports.
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