Taiwan’s economy is deteriorating this quarter compared with last quarter, as private investment and consumption showed further weakness, according to the latest Ifo World Economic Survey, which was released on Thursday evening.
The outlook might not brighten in the next six months, as the global economic landscape continues to cloud over, which is unfavorable for the nation’s exports, the German-based institute’s quarterly survey found.
The first-quarter survey results ran counter to statements by the Directorate-General of Budget, Accounting and Statistics that the economy has likely bottomed out and would start to recover soon.
The score for the macroeconomy came in at 1.2 for the current quarter, down from 1.9 in the final quarter of last year, the survey of 1,085 experts from 210 countries said.
The National Development Council helped gather information for the Ifo survey on Taiwan: Scores between 1 and 3.5 indicate contraction, while those at about 5 signify stagnation and values between 6 and 9 suggest a positive trend.
Capital expenditure dropped to 1 this quarter, falling from 2.6 three months earlier, while private consumption softened from 3.5 to 1.4, the Ifo report showed.
The findings suggested a persistent downtrend after the domestic economy slipped into a recession in the second half of last year — with GDP contracting 0.28 percent last quarter and 0.63 percent three months earlier.
The official statistics agency is due to update GDP figures next week.
The Ifo survey assigned a 5.8 score for Taiwan’s six-month outlook, little changed from 5.7 previously, the report said.
Prospects for capital expenditure came in at 5, down from 5.2 in the preceding quarter, while private consumption weakened from 4.3 to 4, the report said.
Exports may stagnate at 5.5 in the coming six months, from a lackluster 5.4 in the previous forecast, the report said. Likewise, imports may stand pat at 5.4 moving forward.
Inflation expectations are the only measure with a positive outlook at 7.4, the report said, as oil price disruptions may taper off even though fuel costs are likely to remain at low levels for an extended period.
Given its heavy dependence on external demand, Taiwan is susceptible to global headwinds that loom larger this quarter as evidenced by drastic corrections in financial markets worldwide, the report said.
The Ifo index for the world economy dropped from 89.6 to 87.8 this quarter, drifting further from its long-term average, it said.
“The economic climate deteriorated in all regions and continues to lack impetus,” the report said, adding that the sharp decline in oil prices seems to have no positive economic benefits.
Experts had expected oil savings to translate into better corporate profits and consumer spending, a forecast that had failed to materialize over the past one-and-a-half years.
The US dollar is considered somewhat overvalued, but survey participants expect the greenback to gain further value over the next six months, the report said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
RSS