Taiwan’s excess savings skyrocketing

PROFITABLE TIMES: The savings, which were at NT$4 trillion just two years ago, are now projected to crack NT$11 trillion next year as the AI boom drives meteoric growth

Taiwan’s excess savings are expected to reach a record NT$11 trillion (US$345 billion) next year, as the artificial intelligence (AI) boom boosts the country’s exports and current account surplus, the Directorate General of Budget, Accounting and Statistics (DGBAS) said.

With excess savings expected to reach a record high, the excess savings rate is forecast to rise to a new high of 29.49 percent next year, up from an estimated 25.13 percent for this year, DGBAS data showed.

Excess savings refers to the difference between a country’s gross domestic savings and gross domestic investments and largely serves as an indicator of idle funds.

New Taiwan dollar notes are pictured in Taipei in an undated photograph.

Photo: Taipei Times file photo

From 2020 to 2023, Taiwan’s excess savings hovered at about NT$3 trillion, but strong global demand for AI applications beginning in 2024 boosted the country’s exports, paving the way for a rise in the current account surplus and an increase in excess savings.

The current account primarily measures a country’s exports and imports of goods and services.

Taiwan’s excess savings topped NT$4 trillion for the first time in 2024 and rose to NT$5.6 trillion last year. The DGBAS said excess savings are expected to surpass NT$8 trillion this year, reaching NT$8.4 trillion.

DGBAS Department of Statistics chief Tsai Yu-tai (蔡鈺泰) said it was no surprise that excess savings increased after a spike in the country’s current account surplus.

However, an increase in excess savings does not necessarily have negative implications, Tsai said, referring to concerns over the accumulation of idle funds in the country.

To meet robust global demand for AI products, many Taiwanese high-tech manufacturers have been keen to expand production, using disposable funds for investments and growth, he said.

Because of increased investment, the DGBAS last week revised down its forecast for Taiwan’s excess savings to NT$8.4 trillion from an estimate of NT$9 trillion made in May after taking increased investment into account, he said.

In addition, the DGBAS has said gross domestic investment should hit NT$8.74 trillion this year, up from NT$7.28 trillion last year, and should rise to a record NT$9.22 trillion next year.

The increase in excess savings simply reflects savings growing faster than domestic investment, Tsai said.

Amid optimism over AI development, Tsai said he expects domestic investment to continue growing and boost the economy.

The DGBAS has raised Taiwan’s GDP growth forecast for this year to 11.05 percent, a 39-year high, citing stronger-than-expected exports, investment and consumption.

Taiwan’s GDP should grow 6.04 percent next year, the DGBAS said.