Following the recent rally in equities, Cheng Cheng-mount (鄭貞茂), head economist at Citigroup Taiwan Inc, yesterday warned that the economy could hit several lows before finally bottoming out and recovering.
With the legislature recently approving a NT$150 billion (US$4.41 billion) stimulus package, Cheng said that “at the earliest, the results would only be seen in the second half of 2009,” adding that its “impact remains to be seen.”
Cheng, who was speaking at a government-sponsored conference on the outlook for the world and local economy, said that the recent stock market rally was not indicative of a domestic recovery.
As the country’s export-oriented economy is heavily dependent on the US, “the reality is that although our export orders fell by 40 percent in January, US consumption only fell by 10 percent,” Taiwan Electrical and Electronics Manufacturers’ Association (TEEMA, 電電公會) executive director Luo Huai-jia (羅懷家) told the conference in Taipei yesterday.
“The truth is as soon as developed nations, such as the US, notice a slight disturbance in local consumption, they quickly stop all orders. They only resume orders when all inventory is digested. And when they do, Taiwan only sees rush orders here and there, but nothing long term,” Luo said.
“Sadly, there is no visibility going out six months,” Luo said.
Luo said only when component sales and factory openings pick up “can we reasonably assume that [economic] activities are warming up.”
On cross-strait trade, Luo said that as the Chinese government works to increase domestic demand by subsidizing electronics purchases by rural consumers, many Taiwanese enterprises stand to profit not just from component or equipment sales, but also from after-sales repair and customer service.