Mon, Jul 11, 2016 - Page 6 News List

EDITORIAL: New stimulus measures needed

As of the end of last month, the nation’s exports had been falling for 17 consecutive months on a yearly basis, which is much worse than the 14 straight months of annual contraction seen during the 2008-2009 global financial crisis. While the pace of annual decline for both exports and imports narrowed last month from May, it could be attributed in part to the high base effect compared with last year and the recent stabilization in global commodity prices.

The Ministry of Finance on Friday reported the foreign trade data for last month, showing that major export items saw smaller contraction from a year earlier, with electronic parts even ending 14 consecutive months of declines in outbound shipments to report a double-digit percentage increase. The value of total exports declined 2.1 percent year-on-year to US$22.89 billion last month, the smallest annual decrease since February last year, while imports fell 10 percent to US$19.31 billion over the same period.

Last month’s trade numbers were better than expected, boosted by the semiconductor industry.

Taiwan is among the export-oriented economies in Asia that have taken a hit from the economic slowdown in China and the crash in commodity prices in the past several months. In the first half of the year, the nation’s exports totaled US$131.33 billion, down 9.1 percent from a year earlier, while imports declined 10.7 percent to US$107.3 billion over the same period, ministry data showed.

On the bright side, leading indicators, such as the manufacturing purchasing managers’ index, still point to an upward trend in growth, implying that the improvement in imports could continue amid firm demand for machinery and other capital goods. Meanwhile, the anticipated restocking activities for electronics parts and the launch of several new consumer electronic products by major international brands, including a new iPhone model, might drive seasonal demand and lead the nation’s exports back into positive territory this quarter as expected.

However, as there is little indication of a real turnaround in global economic fortunes, can last month’s trade figures back up a turnaround in the exports outlook and signal a solid recovery in the economy?

Do not jump for joy just yet. The better-than-expected trade performance last month was based on only a few sectors, in particular electronic components and information and communication technology (ICT) products. Indeed, there is cause for concern over the declining global competitiveness of Taiwanese ICT products and a major challenge facing the nation is how fast Taiwan can transform its industrial structure and diversify exports beyond ICT.

Externally, the risk of a slowdown in China remains and the UK’s vote to leave the EU ushers in a period of prolonged uncertainty for global markets, while the US Federal Reserve is likely to get back on its interest rate hike cycle later this year, which might trigger another round of capital outflows from Asia. There remains a question mark over the strength of seasonal demand in the electronics sector and non-electronics shipments (including mineral, petrochemicals and optical products) during the second half given the weakness in the global macro-economic conditions and continued slowdown for many of the nation’s major trading partners.

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