(Bloomberg) -- Taiwan’s economy is set to receive a substantial boost this year from Taiwan Semiconductor Manufacturing Co.’s unprecedented spending spree as the chipmaking giant accelerates plans to build more factories. 

Taiwan’s largest company revealed plans earlier this month to spend between $40 billion and $44 billion this year on new plants to help ease the shortage of semiconductors. That’s equivalent to around 5% of Taiwan’s $760 billion economy, based on the government’s gross domestic product estimates for 2021. And while a portion of TSMC’s capital expenditure will go overseas, the majority will be spent at home to expand factories making its highly sought-after semiconductors. 

Winston Chiao, an economist at Taipei-based Taishin Securities, says TSMC’s spending plans mean he is likely to upgrade his most recent forecast of 4.2% GDP growth this year.

“TSMC’s $30 billion outlay on capex last year triggered a series of investment spending and new factory construction in all the companies in its supply chain, such as steel, chemicals and other raw materials,” he said Wednesday. 

Taiwan’s GDP likely grew 6% last year, according to a Bloomberg survey of economists. That would be the fastest rate of expansion since the rebound in 2010 after the global financial. The government’s statistics office is scheduled to release fourth-quarter and full-year data later Thursday. 

Growth was predominantly fueled by a stellar year for Taiwan’s exporters. Global demand for semiconductors and other electronic products surged, driven by rebounding consumer spending as most countries eased their coronavirus lockdowns through the year. 

Corporate revenues reflected this, with the combined annual sales of companies on the Taiwan Stock Exchange rising 15% to a record high NT$38.2 trillion ($1.4 trillion), according to a statement from the bourse. The benchmark Taiex index reached multiple record highs throughout the year and the Taiwan dollar strengthened to a new 24-year high. 

For 2022, the main risk for the economy is whether the government adopts strict new measures to stamp out a small-but-growing Covid-19 outbreak. Domestic consumption is forecast to have rebounded in the fourth quarter of 2021 after a partial lockdown in the middle of the year shut down entertainment venues and banned in-restaurant dining. 

Renewed restrictions could risk further exacerbating growing imbalances between sectors that rely on domestic consumption and the thriving export industries, according to Natixis SA’s Asia-Pacific Chief Economist Alicia Garcia Herrero.

“This divergence in growth has begun to affect wages and inflation,” she wrote in a report Wednesday. “Sectors related to global trade, such as semiconductors and shipping, have enjoyed high wage growth, while the services sector is in a parallel universe.”

She warned that Taiwan’s economy could face an outbreak of Dutch disease, resulting in the non-export sectors being unable to keep pace with tech industry, leading to rising inequality. 

The government, for now, sees a healthy rebound, projecting domestic consumption will rise 5.36% this year. 

“With fewer and fewer countries aiming for Covid-zero and Taiwan also expected to learn to live with the virus, we will not likely go back to the lockdown stage which dragged the domestic sectors back in 2021,” said Taishin Securities’s Chiao. “Therefore there is little chance that Taiwan will see a hot/cold economy as severe as 2021 this year around.”

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