Manufacturing output is expected to grow at a slower-than-expected pace of 3.09 percent year-on-year this year, rather than 3.42 percent, because of slowing economic growth in Taiwan’s major trading partner, China, the Industrial Economics and Knowledge Research Center (IEK) said yesterday.
It is the first time the IEK has cut its growth forecast for manufacturing output for this year since its last forecast in October last year.
For the full year, the output value of Taiwan’s manufacturing sector is forecast to expand to NT$17.72 trillion (US$588.55 billion) from NT$17.19 trillion last year, the IEK said.
The growth is supported mainly by a steady economic recovery in the US and Europe, the government-funded research institute said.
The government’s policies to boost exports and investment would also help, the research house said.
“While the global economy is recovering steadily, Taiwanese manufacturers should remain cautious toward their business outlooks as China’s economic growth shows signs of deceleration,” IEK senior researcher Cheng Chih-chiang (陳志強) told a press conference.
China’s industrial production index and purchasing managers’ index are both projected to trend down this year due to the country’s structural transformation of its economy, Cheng said.
As China is close to signing a free-trade agreement with South Korea, Taiwanese manufacturers may lose competitiveness compared with their Chinese and South Korean rivals when attempting to win orders from overseas customers, Cheng said.
“Local manufacturers should adjust their product portfolios and make higher value-added products to stay competitive in the global market,” Cheng said.
The IEK forecasts the output value of the consumer electronics and components sector will grow by 4.79 percent this year after a 4.5 percent expansion last year, driven largely by strong demand for smartphones and tablet computers.
The output value of the chemical products sector is forecast to grow 3.14 percent this year, while those of the consumer goods and machinery sectors are forecast to grow 1.86 percent and 1.62 percent respectively, IEK report said.
While Taiwanese companies with advanced technologies will remain competitive against their Chinese rivals, Cheng recommended local smartphone and tablet manufacturers to jump into the wearable device and server markets, as those products are still underdeveloped and have higher growth potential.
Cheng suggested that machinery and consumer goods manufacturers target emerging markets in Southeast Asia, such as Vietnam, while avoiding the Chinese market, where there is an oversupply problem.
Meanwhile, with Vietnam set to become a member of the Trans-Pacific Partnership, Taiwanese textile companies should look to set up plants in the country to take advantage of future tariff reductions, Cheng said.