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Manufacturing growth likely to lose steam next year

The growth rate of the nation's manufacturing production index is forecast to slow next year, owing to the US' weaker economic outlook and possible economic problems in China, according to a leading economic think tank.

The index, compiled by the Taiwan Institute of Economic Research (TIER, 台經院), grew 10.01 percent year-on-year to 130.92 points in August, but was down from 131.86 points in July.

The index's base year is 2001.

"The index's growth rate will slow down ... next year, influenced by a weaker economy," said Chang Chien-i (張建一), a research fellow with TIER, at a forum co-organized by an economics ministry agency and TIER yesterday.

China and Hong Kong are the largest export destinations for Taiwan's manufacturing sector, especially electronics components, chemical materials and basic metal industries, making up 37.01 percent of US$113.3 million worth of exports in the first eight months of this year.

The US accounted for 16.04 percent and Europe 13.30 percent, according to TIER's figures.

In the US the waning effect of last year's tax cuts and a rise in interest rates have seen a softening of domestic consumption, with growth expected to decline from around 4 percent this year to 3 percent next year, Chang said.

China's fixed investment, which is the locomotive of its economic growth, could slide sharply if the global economic climate worsens next year, in turn dragging down its gross domestic production growth and possibly leading to a hard economic landing, he said.

Combining these factors, Taiwan's export-oriented economy may see a slowdown next year, Chang said, citing an Asian Development Bank report released last month in which Taiwan's economic growth next year is estimated to be 4.8 percent, down from 6.0 percent this year.

The nation's gross domestic product is expected to grow 5.87 percent this year and 4.49 next year, the Directorate General of Budget, Accounting and Statistics said in August.

Cheng Cheng-mount (鄭貞茂), the vice president of Citibank Taiwan, a panelist at the forum, said several manufacturing industries -- such as base metals as well as plastics and chemical materials -- may continue receiving support from higher crude oil prices worldwide.

Oil prices are expected to drop to around US$42 a barrel in the first quarter next year and around US$38 in the second quarter, he said.

Crude prices were firmer in Asian trading yesterday, with New York light sweet crude for delivery in December trading at US$54.60 a barrel in Singapore, US$0.13 higher than its close in New York overnight, news agencies reported.
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