Exports and growth continue to Languish
How many synonyms for “decline” exist in the English language? Reports on the current state of Taiwan’s economy offer a good sampling, as nearly all indicators point south.
Exports, perhaps the most scrutinized figure for Taiwan’s trade-driven economy, continued to slump in March for the 14th consecutive month, falling by some 12.1% in the first quarter of 2016. Economists offer various explanations for the drop: primarily sinking oil prices, the slowdown in China, and stagnant global economy, along with heightened competition in sectors where Taiwan has the most exposure, such as electronics.
Exports in the crucial electronics and machinery sector, which accounts for some 54% of total exports, sank by 8.2% in the first quarter, reflecting languishing global demand, a lack of new technology products, and heightened competition from Chinese suppliers. Yeh Maan-tzwu, head of the Department of Statistics at the Directorate General of Budget, Accounting and Statistics (DGBAS), cited declines in the all-important smartphone industry as being responsible for much of Taiwan’s anemic performance in technology exports. He was quoted in the media as saying that smartphone shipments contracted by 80% in the first quarter in annual comparisons. In addition, Taiwanese firms supplying camera lenses and other optical equipment are suffering due to growing competition from Chinese suppliers.
Economists don’t see the potential for recovery in exports until at least the third quarter. Amid the gloom, however, even negative numbers that aren’t as bad as predicted get reported as good news. For example, export orders declined by only 4.7% in March, less than the forecast 10%, which prompted a Ministry of Economic Affairs official to crow to the media that the drop represented “the smallest decline since October last year.” Export orders for the first quarter slid 8.3%, to US$98.48 billion.
Conversely, even rising numbers don’t necessarily bode well. For example, the purchasing manager’s index (PMI) – a leading indicator of activity in the manufacturing sector – rebounded to 54.9, in March, indicating optimism. However, economists with the Chung-Hua Institution for Economic Research (CIER) noted that the rise is due mainly to the low comparison base following the Chinese New Year holiday in February.
As a result, Taiwan’s leading economic research institutes have all cropped their forecasts for GDP growth for the year. CIER slashed its forecast from the 2.24% made last December to 1.36%, while the Taiwan Institute of Economic Research (TIER) trimmed its forecast from 1.53% in January to 1.27%. DGBAS reported that Taiwan’s economy remained mired in recession for the third consecutive quarter, contracting by 0.64% in the first quarter.
On the other hand, not all falling numbers are bad. Unemployment, for one, fell in March to 3.89% from 3.95% a month earlier, while the consumer price index (CPI) dropped to 2% from 2.41%. Consumer confidence waned 0.97 points to 80.37 in March, according to National Central University’s index. The index is on a 200-point scale and anything below 100 is considered pessimistic. Taiwan has never scored above 100.