Taiwan’s economy entered 2015 on a high after coming off a year of resurgence in tech exports. As first half numbers come in now, however, the economy looks set to miss nearly all of its targets. At the beginning of the year, Taiwan’s Directorate General of Budget, Accounting and Statistics (DGBAS) forecast GDP growth at 3.71% but has since lowered the projection to 3.32%. Think tanks and financial firms are even more pessimistic, with the Chung-Hua Institution for Economic Research (CIER) slashing its growth forecast from 3.56% to 3.04%, and Yuanta-Polaris Securities likewise lowered its estimate from 3.66% to 3.32%.
For Taiwan’s export-driven economy, weakening global demand is a key factor in the slower growth. Taiwan’s total trade declined year-on-year by 7.8% in the first half of 2015 and by 12.9% in June. Exports have fallen by 3.9% so far for the year, and in June came in 11.8% below the level of a year earlier. Imports have declined even more – by 12% for the first half and 14.1% for the month of June alone. The lower import level enabled Taiwan to maintain a favorable trade balance but indicates declining consumption and investment, according to Yuanta-Polaris. The securities firm cut its 2015 forecast for investment growth from 3.91% to 2.73% and for private consumption growth from 3.01% to 2.47%, citing low salaries.
Taiwan’s Industrial Technology Research Institute (ITRI) cut forecasts for growth in the manufacturing sector this year to 0.86%, from earlier estimates of 2.71%. ITRI points to declining oil prices as hitting the petrochemicals industry hard, with revenues expected to decline 12% in 2015.
Following four straight months of improvement, the unemployment rate rose from 3.62% in May to 3.71% in June, still low by international standards. The rise is mainly attributed to the entrance of recent graduates into the labor market, but analysts also raise the question of whether the declining exports and a recent hike in the minimum wage (up 3.81% to NT$20,155 a month), has dampened employers’ enthusiasm to take on staff.
Despite the slower economic growth and poor export numbers, the monthly consumer confidence survey conducted by the National Central University Research Center for Taiwan Economic Development finds that consumer confidence remains high, with the index reaching 92.93 – its highest score ever – in April. Analysts pointed to a surging stock market, which in April hit 10,000 points for the first time in 15 years, as a significant factor in the positive consumer sentiment.