Full-year gross domestic product was estimated at 2.98 per cent for 2020, higher than a November forecast of 2.54 percent, according to preliminary data released by the Directorate-General of Budget, Accounting and Statistics.
The numbers were confirmation of Taiwan's remarkable success in navigating the coronavirus pandemic. It has recorded fewer than 900 cases and just seven deaths after it swiftly locked down its borders.
"Because of our success in containing the pandemic, manufacturing activities and private consumption can continue to boost the economic growth," said Wu Pei-hsuan, an official at the top budgeting agency.
Taiwan's giant neighbour China -- where the pandemic began but has been largely stifled -- grew 2.3 per cent, a performance most countries would envy but still its slowest pace in more than four decades.
That means Taiwan's growth outpaced China for the first time since 1991.
Taiwan's fourth quarter growth was especially strong thanks to exports -- up 4.94 per cent on year, the best quarterly performance since early 2011.
The island is a major world player in electronics and crucial latest generation semiconductors and microchips.
"The main reason for the significant economic growth is the technological advantages that our semiconductor makers hold," said Wu.
"Also the manufacturing sector continued to invest domestically in recent years to expand production capacities... that spurred high growth in exports," she told reporters.
Exports soared to a historic high in 2020 to $345.28 billion, up 4.9 per cent on-year despite the global economic slowdown, according to official data.
In particular, shipments of semiconductor chips rose 22 percent on-year to $122 billion.
Taiwan has been the world's premier destination for computer chip and electronics manufacturing and is home to tech giants including Foxconn and Taiwan Semiconductor Manufacturing Company (TSMC).
Semiconductor shortages, caused by supply chain priorities changing because of the coronavirus pandemic, have hampered car production in recent weeks.
European car manufacturers have been reaching out to Taipei for help after shortages hit the global auto industry, with some major manufacturers forced to suspend production lines.
TSMC, the world's largest contract chip maker, said Thursday the auto industry was a "top priority" for the company, although its factories are already at full capacity.
"We expect that Taiwan will register even stronger growth in 2021, at 4.3 per cent, after the reasonable performance of 2.98 per cent in 2020," said Iris Pang, ING's chief economist in Greater China.
"This will mostly be because of the higher export value of semiconductors stemming from an increase in both prices and volumes," she said in a research note, also warning of the risk of relying on a single growth engine.
Taiwan's government in November predicted the economy to grow 3.83 per cent this year and was set to release an updated forecast next month. - AFP