Taiwan Economic Outlook – April 2017

Exports Buoyed By Global Tide

Taiwan’s exports continued to rise in February in annual comparisons as the island’s trade-dependent economy makes up ground lost during a 17-month slump that only began turning around this past fall. Exports reached US$46.4 billion for the first two months of the year, a 16% rise compared to last year. Taiwan’s major trade goods, especially plastics, metals, and chemicals, rose by 20.4%, 23.2%, and 21% respectively in annual comparisons. These dramatic hikes partly reflect the low base of comparison, but also the renewed strengths in these sectors. Taiwan’s oil-dependent chemical and plastics sectors saw revenues plummet last year as crude oil prices fell nearly to US$30 per barrel. With oil prices now stabilizing around US$50, revenues and profits are starting to rise. The increase in metals exports likewise reflects a general rise in commodities prices as demand revives in emerging markets and China’s economy stabilizes.

Data Source: TWSE, Unit: NT$ Billion

In the machinery and electrical equipment category, which accounts for 54% of total exports, overseas sales for the first two months came to US$25.66 billion, a year-on- year increase of over 16%. Electronic components, including semiconductors, made up 32.7% of exports and jumped by nearly 19% year-on-year.

China and Hong Kong, which together take 40% of exports, saw the value of shipments from Taiwan rise to US$18.54 billion, a 16% increase in sales to Taiwan’s most important market. Exports to the United States, Taiwan’s second-largest trade partner, taking 11% of its exports, rose 5.9% in annual comparisons to US$5.16 billion. Imports from the United States jumped 22%, though, to US$5 billion, narrowing Taiwan’s favorable trade balance with the United States to US$756 million.

Exports to Japan, meanwhile, nudged upwards by just 2.2% to US$3.13 billion, but imports from Japan surged 22% to US$6.6 billion for a trade deficit of US$3.46 billion.

Total imports rose faster than exports in year-to-date comparison, climbing 22.7% to US$39.54 billion, leaving Taiwan with a total favorable balance of trade of US$6.9 billion.

Most of Taiwan’s imports are raw materials that are later exported as finished goods. Taiwan’s chemical and plastics industries are examples. Imports of mineral products, which include crude oil, LNG, and coal and coke, leapt over 53% in the first two months of the year to reach US$7.39 billion, equal to 19% of all imports. (Taiwan gets most of its crude and much of its LNG from the Middle East; imports from that region surged 35% in the first two months.) This jump reflects higher oil prices, but also the island’s resurgent petrochemicals and plastics industries, which rely on distillations of fossil fuels for their feedstock.

Export orders, a leading indicator of manufacturing activity several months in advance, jumped 22% in February year-on-year. Taiwan received export orders worth US$33.75 billion that month, for a total of US$69.72 billion year-to-date.

The Purchasing Managers Index, another leading indicator of future manufacturing activity, rose by 2.4% to 55.8 according to the Chunghua Institution of Economic Research. In light of the good news, the National Development Council’s Economic Indicator continued to flash green, indicating healthy growth.

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