Taiwan Economic Outlook – April 2018

Exports Experience a Slight Weakening

Taiwan’s export streak finally came to an end in February after 16 straight months of gains when exports declined by a slight of 1.2% for the month, mostly attributed to Chinese New Year holiday which this year fell on February 15-20. The months of January and February are generally considered jointly as the New Year holiday reduces the number of working days in either month. Total exports year-to-date maintained their growth momentum of 7.3%, hitting a record US$49.75 billion. Still, exports had been forecast by economists to grow by 6.5% in February even considering the New Year holiday, and they needed to maintain growth to reach the target of 8% growth for the quarter.

The Directorate-General of Budget, Accounting and Statistics has raised its forecast for GDP growth in 2018 from 2.29% to 2.42% on the strength of local consumption and investment, particularly government infrastructure and industrial development programs. Exports, however, are always a key driver of growth for Taiwan.

Exports to China/Hong Kong declined in February by 10.8% to US$8.3 billion, bringing their share of total exports to 37.2%. Year-to-date, however, trade with China/Hong Kong saw a brisk rise of 7.3%, reaching US$19.5.

February, meanwhile, saw a big rise in exports to the United States, Taiwan’s second largest trade partner – by 12.6% to reach US$2.6 billion, and increased year-to-date by 11.8% to US$5.8 billion. Imports from the United States also rose in February – by 6.7% to US$2.4 billion – and year-to-date to US$5.2 billion.

Machinery and electrical equipment continued to account for 53% of total exports but saw a 2.2% decline in value February; year-to-date the sector’s exports rose 5.3% to reach US$25.1 billion. Machinery, alone some 8% of Taiwan’s total exports, maintained a year-to-date rise of 13.5%, outperforming the other sectors in the category.Leading manufacturing indicators were lower in February, again largely due to the shorter month, with the Purchasing Managers Index plunging 14.6%, from 59 to 50.4. Any number 50 or above is considered growth.

Unemployment rose slightly in February to 3.7% from January’s 3.64%. The consumer price index increased more substantially, from 0.89% in January to 2.19% in February, but that didn’t diminish consumer confidence, which continued an upward trend.