The Industrial Economics and Knowledge Center (IEK) yesterday forecast the production value of Taiwan’s manufacturing sector would contract by 1.74 percent this year, compared with a 0.86 percent annual growth estimated last month.
The latest forecast was the institute’s third downward revision in eight months. Last year, manufacturing output grew 3.97 percent following an annual decline of 0.9 percent in 2013.
“Weak international economies and the increasing localization of supply chains in China have severely affected Taiwan’s export performance,” IEK senior researcher Peter Chen (陳志強) told a forum on global economic outlook in Taipei.
The latest forecast was also released two months ahead of the IEK’s scheduled release date in October, Chen said.
“The reason we released the forecast ahead of schedule is because domestic and international economics have faced drastic changes over the past month,” Chen said, citing the Greek debt crisis and China’s volatile stock markets.
“We will not rule out the possibility of cutting our forecast further, if seasonal demand in the fourth quarter does not actualize,” he said.
Falling exports to China and ASEAN and declining prices of global crude and raw materials are expected to impact on Taiwanese manufacturers’ production value this year, which might reach NT$18.66 trillion (US$569.42 billion) down from an Industrial Research Technology Institute estimate of NT$19.15 trillion two months ago, the IEK said.
In the report, the IEK trimmed the output forecasts for information technology hardware, chemical products and products of basic metal and machinery.
The information and technology segment, which is the biggest contributor to the overall manufacturing sector, is expected to grow at an annual rate of 3 percent annual to NT$6.21 trillion this year, rather than 4.8 percent estimated earlier, the report said.
Given that the production output of semiconductors was affected by the softer-than-expected demand for handheld devices this year, the IEK cut the output forecast from 4.38 percent growth to 3.1 percent for this year, the report said.
The IEK forecast the output of basic metal and machinery products to decline 3 percent to NT$5.25 trillion from last year, rather than a growth of 1.5 percent it previously estimated, mainly due to falling average sales prices, excess supply from China and a decline in machinery goods exports, the report said.
Production value of chemical products is also expected to drop 7.6 percent from a year ago as average selling prices of products are continually affected by a decline in global oil prices, Chen said.
He said global crude oil prices have fallen to below the institute’s estimate of between US$55 and US$60 per barrel recently. West Texas Intermediate crude climbed 4.5 percent to US$40.32 per barrel at 10:51am in London trading, according to Bloomberg’s figures.
The IEK said that although prices of chemical products fell heavily this year, production volume did not contract from a year ago, which is a positive sign, as the institute expects price declines in chemical products to slow next quarter.
As the manufacturing sector — one of the major pillars of the nation’s GDP — is losing steam, Taiwan’s economic growth is in a dire situation, Chen said.
“Now we are waiting to see if Taiwan can grow its economy by one percent [annually] this year,” Chen said.
Additional reporting by Lisa Wang
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