Taiwan’s economy has been on track for a mild recovery since late last year, but the latest data show the nation’s economic activity in the first three months of the year has failed to instill as much vitality as expected, raising the prospect of a bumpy road ahead.
External demand remains uncertain, while it looks likely that there will be even more economic challenges this quarter. If private investment falls short of the government’s forecast — and most importantly, if the avian flu situation further impacts the leisure and travel sectors, as well as private consumption — the government may yet have to rethink its plans to boost the economy.
Last week, the Ministry of Economic Affairs reported that exports had a lackluster performance in the first quarter, amid signs that the world economy is slowing. Furthermore, according to data released on Monday, growth in export orders contracted 6.6 percent year-on-year last month and was down 1.7 percent in the first quarter, indicating that the weakness in shipments over the next one to three months has lasted beyond the seasonal impact of February’s Lunar New Year holiday.
Then, on Tuesday, the ministry released weaker-than-expected industrial production data for last month, which showed output from the industrial sector declined 3.28 percent year-on-year, the biggest drop in 15 months. Cumulative output in the first quarter rose 0.78 percent year-on-year, but declined 6.1 percent quarter-on-quarter.
On the same day, the ministry said that domestic commercial sales remained weak and the latest data indicated that revenue from the wholesale, retail and restaurant sectors was down 0.7 percent last month from the previous year, while cumulative revenue last quarter rose just 0.4 percent year-on-year.
The figures suggest that if anyone had been celebrating the “green shoots” of economic recovery this year, their celebrations will have fizzled out late last quarter.
Moreover, consumer demand, which is necessary for sustainable recovery, is likely to remain subdued.
The latest unemployment figures, released on Monday last week, showed that the seasonally adjusted jobless rate gained 0.02 percentage points to 4.18 percent last month, staying flat from a year ago due to the stagnant job market.
The final blow came on Friday, when the Council for Economic Planning and Development said the composite economic indicators were at “yellow-blue” for the seventh consecutive month last month, suggesting that the momentum for recovery is still weak. More surprisingly, the annualized six-month moving average of leading indicators, which provides a more accurate forecast of near-term business cycles, fell by 0.2 percentage points month-on-month last month. This was the first decline since July last year, hinting that the nation’s economic momentum is slowing.
A major threat to the economy during this quarter and in the second half of the year is the strength of economic recovery in other parts of the world, especially in developed nations. Therefore, it is not surprising that several Taiwanese high-tech companies have said in recent weeks that they have limited industry visibility for the near term, and have no plans to increase capital investment targets for the year.
With the recent news that economic growth in China and the US was weaker than expected in the first quarter of the year, with economies in many parts of the eurozone still in recession, and renewed concern over H7N9 avian flu in Taiwan, a further period of sluggish economic growth remains a distinct prospect, at least during the current quarter.