Taiwan Economic Outlook – November 2019

2019 Outlook Positive as Exports Increase

Taiwan finished out the third quarter with year-on-year export growth exceeding 2%, bringing it ahead of the other three Asian Tigers for the first nine months of 2019. The figure indicates real export growth after adjusting for inflation. The Ministry of Finance notes that this growth rate has increased steadily over each quarter this year, with a 0.7% increase for Q1, 3.8% for Q2, and 4.8% for Q3, a testament to the Taiwan economy’s resilience in the face of international trade tensions and unfavorable global economic conditions. Other regional economies, including those of South Korea, Hong Kong, and Singapore, have not fared as well, reporting year-on-year decreases in outbound sales for the same period.

Export orders dropped yet again in September, this time by 4.9% from a year earlier, but rose by a high 13.7% from August – mostly residual growth from the peak season for the global electronics industry. Machinery exports dropped 12.1% from September the previous year, reflecting decreasing demand and a sluggish global economy. Other heavily affected sectors include chemicals, which fell 28.7%, and base metals, which experienced an 18.9% decline.

The Ministry of Economic Affairs in October reported that foreign direct investment for January through September totaled US$7.8 billion, up 9.4% from the same period last year. Inward investment from China – a total of US$87 million – fell a sharp 54.6% year-on-year. Outbound investment (excluding China) decreased 36.8% from the first nine months of 2018, while outward investment to China fell 57% year-on-year for the same period.

After projecting annual growth for the Taiwan economy this year of 2.06% in July, the Chung-hua Institution for Economic Research (CIER) on October 18 increased its forecast to 2.33%. CIER cited the increasing amount of returning Taiwanese investment and the shift of orders from China to Taiwan as major elements contributing to its revised forecast. Yeh Chung-hsien, vice president of CIER, said these factors will continue to impact Taiwan’s growth through 2020, but pointed to the slowdown in China’s economic growth as a concern.

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