Economy

BofA Warns About Risks Linked to Taiwan’s Lack of Economic Diversification

Bank of America (BofA) recently released an analysis highlighting Taiwan’s pivotal role in the global technology supply chain. As a leading semiconductor manufacturer, Taiwan produces over 60% of the world’s semiconductors and 90% of advanced chips, contributing significantly to the global semiconductor supply chain with 10% of its value added.

BofA projects that Taiwan’s dominance in the tech sector will continue to drive economic growth in the short to medium term, forecasting a GDP growth of 3.7% in 2024.

The uplift in exports, especially noted since the latter half of 2023, is largely attributed to rising demand for artificial intelligence (AI). This trend is expected to further support Taiwan’s export recovery and enhance investment momentum. However, BofA warns of the risks linked to Taiwan’s limited economic diversification.

With over 50% of the GDP reliant on tech exports, Taiwan is particularly susceptible to potential downturns in global trade, onshoring trends, and geopolitical tensions.

BofA pinpointed three key constraints that could impede Taiwan’s growth potential: a structural energy supply shortage, a dwindling pool of tech talent, and challenges in maintaining macroeconomic and financial stability amid substantial capital flows. These hurdles are intensified by the heavy concentration of exports, with 60% consisting of tech products and 35% directed toward mainland China and Hong Kong.

Despite efforts by the Taiwanese government since the mid-2010s to diversify foreign direct investment (FDI), BofA observes that these initiatives have not effectively tackled the structural challenges the economy faces. The measures taken have not led to significant diversification or increased resilience.

BofA advises the government to take urgent steps to address issues regarding energy security and talent shortages to bolster economic security.

For long-term sustainable growth, BofA recommends that Taiwan seek new avenues by expanding its technological expertise into other high value-added sectors, including semiconductor design, biotechnology, renewable energy, and intelligent machinery, as well as services such as healthcare.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button

Adblock Detected

Please consider supporting us by disabling your ad blocker