Alicia García Herrero (Natixis) | Taiwan’s elections are one of the most important geopolitical events in 2024. The state of the economy is part of the story, but not an essential one so far. This might look counter-intuitive given the underperformance in 2023, but the devil is in the details. The labor market is resilient, and consumption is growing faster than in 2022, both of which are important for voters. The drag has come from the exports and fixed asset investment, and the latter can be partially linked to pre-election uncertainty. With the decent consumption and the tech cycle rebound, we expect Taiwan’s growth to accelerate from 1.2% in 2023 to 2.9% in 2024, meaning whoever wins should enjoy the tailwinds.
Moving to the candidates’ economic programs, they look very alike for social and labor issues but with divergence surrounding industrial and energy policies. The biggest difference is all about mainland China, including economic relations.
The incumbent and still frontrunner in the polls, the Democratic and Progressive Party (DPP), will continue to push for further diversification in trade and investment away from mainland China towards the US and the rest of Asia. Additional diversification from what has already been achieved will not be easy since Taiwan has missed every train in regional trade/economic deals (RCEP, CPTTP and even the US-led IPEF).
Besides, the recent narrowing gap between the DPP and the Kuomintang (KMT), plus the still relevant role of the third candidate, Ko Wen-je of the Taiwan People’s Party (TPP) is likely to result in the loss of control of the Legislative “Yuan” by the DPP, with relevant consequences in the degree of freedom to conduct policies, including economic ones.
If, in turn, the KMT were to win, more trade and investment with mainland China may be fostered, which could include an extension of the current economic cooperation through the Economic Cooperation Framework Agreement (ECFA).
