Asia — Vietnam and Taiwan outperform the rest of Asia as exports grow

The relatively successful control of COVID-19 and earlier re-openings mean Taiwan and Vietnam will likely be among the few Asian economies, along with China, to avoid a fall in GDP in 2020. Vietnam posted a 2.6% y/y rise in real GDP in July-September, accelerating from 0.4% in the second quarter. Exports jumped in the third quarter, mostly because of a sharp increase in shipments of personal computers to meet growing global demand from online study and working from home. Taiwan is also benefiting from rising external demand for electronic devices, particularly from China (Chart). Taiwan’s exports hit a record-high of US$31.2 billion in August, prompting the central bank to upgrade its forecast for the economy to grow 1.6% in 2020.

Taiwan and Vietnam are well placed to attract more trade and investment from within and outside the region in the coming years. Vietnam is widely seen as a supply-chain alternative to China because of its low labour costs, educated workforce and large and growing population. Investors in Taiwan benefit from its status as a key electronics manufacturing hub. The ongoing global transition toward new industrial technologies (so-called “Industry 4.0”) will likely continue to lift global demand for Taiwan’s 5G-related exports and data centres.

Brightening prospects for Taiwan (Australia’s 9th largest export market in 2019) and Vietnam (13th largest) bolsters Australia’s export outlook. This provides opportunities for Australian exporters of energy, iron ore, LNG, dairy, meat, wheat, grains, consumer goods and machinery. Beyond the pandemic, opportunities exist for Australian education and training services and tourism operators. Downside risks are also prominent. A rise in geopolitical tensions with China or the US would threaten growth trajectories in Taiwan and Vietnam, particularly if concerns about currency manipulation prompts the US to impose trade restrictions.