Taiwan Economic Outlook – October 2017

Taiwan's Jan.-Aug. Trade Figures (Year-On-Year Comparison)

Optimism Grows

The characteristically pessimistic Taiwanese consumer is slightly less gloomy, according to a pair of recent surveys. In a Cathay Financial Holding Co. survey, 26.7% of respondents said they think the economy will improve over the next six months, compared to 32.4% who said it would deteriorate. This is the most upbeat result the survey has recorded in two years, and Cathay Financial attributes it to the recent uptick in estimated GDP growth for 2017, which the Directorate General of Accounting, Budget and Statistics (DGBAS) has raised to 2.11% from the previous forecast of 2.05%.

Meanwhile, National Central University’s Consumer Confidence Index (CCI) likewise came in at a 22-month high of 82.2, a 2.25 point jump from the previous month. The increase was attributed to the government’s plan to hike salaries for civil servants next year, as well as the strong performance of the Taiwan Stock Exchange. The CCI is based on a 200-point scale, and any score below 100 is considered pessimistic.

As new Premier William Lai noted in his first address to the Legislative Yuan, consumer spending is an important component of sustained growth for the Taiwan economy. Lai remarked that Taiwan’s economy remains overly dependent on trade, and rebalancing it will require increasing private investment, seeking out international cooperation and multilateral and bilateral trade deals with nations beyond China, and stimulating foreign direct investment.

Still, Taiwan’s economy is on a growth trajectory due to its strength in trade, particularly with China, where – counting Hong Kong – Taiwan sends 40% of its exports. Through August, exports to China/Hong Kong rose 13.8% rise over last year’s figures to reach US$80.89 billion, according to the Bureau of Foreign Trade under the Ministry of Economic Affairs (MOEA). Imports from China/Hong Kong were up by even more – 19.4% – to come to US$32.78 billion.

Trade with other major partners was also up. Exports to the United States totaled US$23.89 billion, a 9.5% rise over the first eight months of last year, while imports rose 5% to US$19.8 billion. Trade with Southeast Asia continues to grow in line with government policy, with year-to-date exports up 15.3% to reach US$38.24 billion, nearly 19% of the total, while imports grew even faster, by 19.7%, to reach US$20.59 billion. This growth in trade looks set to continue as export orders in August jumped 7.5% from a year earlier to US$40.78 billion, the 13th straight month of increases.

Adding to the rosy outlook, CPI held steady at 0.96%, prompting the Central Bank to leave interest rates unchanged. Unemployment inched up in August to 3.89%, up from 3.84% a month earlier.